The IRS issued final regulations (T.D. 9916) providing guidance on additional first-year (bonus) depreciation under Sec. 168(k), which was amended by the law known as the Tax Cuts and Jobs Act, P.L. 115-97. T.D. 9916 provides taxpayers with guidance on issues involving the application of Sec. 168(k) that were not addressed in 2019 final regulations (T.D. 9874). This includes clarifying guidance on the requirements that must be met for property to qualify for the deduction, including used property. The regulations also address recent legislative changes to the depreciation rules for qualified improvement property.
The final regulations provide:
- Rules relevant to the definition of qualified property;
- Rules for consolidated groups;
- Rules for components acquired or self-constructed after Sept. 27, 2017, for larger self-constructed property for which manufacture, construction, or production began before Sept. 28, 2017;
- Rules for applying the midquarter convention, under Sec. 168(d); and
- Changes to the definitions in the 2019 final regulations for the terms “qualified improvement property,” “predecessor,” and “class of property.”