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Final Tangible
Property Regulations:
Decision Trees
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© 20XX KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of
independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
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To help guide you through the basic steps in
considering how the new Tangible Property
Regulations apply to your repair and
maintenance costs, we created a series of
high-level decision trees—one for buildings,
one for non-buildings, and a combined
decision tree for all tangible property. To
fully understand how these complex new
rules affect your company, we encourage you
to contact either of the KPMG professionals
listed on the last page. We also invite you to
take advantage of our comprehensive Tangible
Property Regulations website, available at
www.kpmg.com/us/repairregs.
© 2014 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International
Cooperative (“KPMG International”), a Swiss entity. NDPPS 243254
SIMPLIFIED DECISION TREE: ALL TANGIBLE PROPERTY
IDENTIFY PROPERTY
TO BE TESTED
BETTERMENT
Non-Bldgs:
Does the expenditure:
 Plant Property
 Network Assets
 All Other
Correct a pre-existing
defect,
Materially add to or
expand property, or
Bldgs:
 Structure
 Systems
ADAPTATION
RESTORATION
Has the property been
adapted to a new or
different use
NO
Does the expenditure:
NO
Replace a component
for which TP recognized
gain/loss on sale or
disposition,
Restore damage
resulting from a
casualty event, or
Materially increase
quality, capacity,
productivity, or
efficiency
Return the property to
an operable condition
after falling into
disrepair
Is there an IIR for this
type of property?
NO
YES
YES
YES
YES
Did the expenditure
directly benefit or was
it incurred by reason of
another capital activity?
Rebuild the property to
a “like new” condition
after the end of its
class life
NO
Must the cost be
capitalized under a
“book conformity” safe
harbor election?
NO
Elec. Generation:
RP 2013-24
Consult IIR for unit of
property and/or
capitalization criteria
Replace a major
component or
NO substantial structural
part, or
Is this a network asset
Telecom:
RP 2011-27; RP 2011-28
YES
Does the expenditure:
YES
NO
Elec. T&D:
RP 2011-43
SPECIAL RULES
Did the taxpayer expect
to perform the activity
at least twice within
the Routine Maintenance Safe Harbor
testing period.
NO
YES
Deduct
(Subject to section
263A)
Buildings: 10 years
Non-Buildings: ADS
recovery period
Capitalize
NO
© 2014 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. NDPPS 243254
YES
SIMPLIFIED DECISION TREE: BUILDINGS
IDENTIFY PROPERTY
TO BE TESTED
BETTERMENT
ADAPTATION
Does the expenditure:
 Bldg Structure
 Bldg Systems:
Has the property been
adapted to a new or
different use
Correct a pre-existing
defect,
HVAC
Plumbing
Materially add to or
expand property, or
Electrical
All Escalators
NO
Fire protection and
alarm system
Does the expenditure:
NO
Replace a component
for which TP recognized
gain/loss on sale or
disposition,
Restore damage
resulting from a
casualty event, or
Materially increase
quality, capacity,
productivity, or
efficiency
All Elevators
RESTORATION
Return the property to
an operable condition
after falling into
disrepair
Security System
Gas Distb. System
Does the expenditure:
Replace a major
component or
NO substantial structural
part, or
NO
Is there an IIR for this
type of property?
NO
Must the cost be
capitalized under a
“book conformity” safe
harbor election?
Did the taxpayer expect
to perform the activity
at least twice within
the Routine Maintenance Safe Harbor
10-year testing period.
Retail Stores:
Expected Summer 2014
YES
YES
Did the expenditure
directly benefit or was
it incurred by reason of
another capital activity?
Rebuild the property to
a “like new” condition
after the end of its
class life
YES
NO
YES
SPECIAL RULES
YES
NO
YES
Deduct
(Subject to section
263A)
Consult IIR for unit
of property and/or
capitalization criteria
Capitalize
NO
© 2014 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. NDPPS 243254
YES
SIMPLIFIED DECISION TREE: NON-BUILDING PROPERTY
IDENTIFY PROPERTY
TO BE TESTED
BETTERMENT
 Plant Property
Does the expenditure:
 Network Assets
Correct a pre-existing
defect,
 All other
Materially add to or
expand property, or
ADAPTATION
RESTORATION
Has the property been
adapted to a new or
different use
NO
Does the expenditure:
NO
Replace a component
for which TP recognized
gain/loss on sale or
disposition,
Restore damage
resulting from a
casualty event, or
Materially increase
quality, capacity,
productivity, or
efficiency
Return the property to
an operable condition
after falling into
disrepair
Does the expenditure:
Replace a major
component or
NO substantial structural
part, or
NO
NO
Must the cost be
capitalized under a
“book conformity” safe
harbor election?
Is this a network asset
Is there an IIR for this
type of property?
Telecom:
RP 2011-27; RP 2011-28
NO
Elec. Generation:
RP 2013-24
YES
YES
YES
YES
Did the expenditure
directly benefit or was
it incurred by reason of
another capital activity?
Rebuild the property to
a “like new” condition
after the end of its
class life
YES
NO
Elec. T&D:
RP 2011-43
SPECIAL RULES
Did the taxpayer expect
to perform the activity
at least twice within
the property’s ADS
recovery period
NO
YES
Deduct
(Subject to section
263A)
YES
Consult IIR for unit
of property and/or
capitalization criteria
Capitalize
NO
© 2014 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. NDPPS 243254
YES
Contact us
Peter A. Baltmanis
National and West Region Fixed
Asset Practice Leader
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E: [email protected]
Lynn M. Afeman
East Region Fixed Asset
Practice Leader
T: 617-988-1139
E: [email protected]
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© 2014 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of
independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. Printed in the U.S.A. The KPMG name, logo and “cutting through complexity” are registered
trademarks or trademarks of KPMG International. NDPPS 243254