On November 20, the IRS provided qualified retail and restaurant businesses with a safe-harbor method of accounting for expenses related to repairs, remodels and refreshes. Under Revenue Procedure 2015-56, qualified taxpayers can now deduct 75% of the amount spent on “qualified” remodels or refreshes.
The IRS provided the guidance to reduce confusion about the deductibility or capitalization of remodel and refresh costs created by the examples in the new tangible property regulations (“Repair Regs”).
While Rev. Proc. 2015-56 supplies a safe harbor that can provide some certainty for taxpayers, it may not be the best answer for all restaurants and retailers. An analysis of the facts of each qualified taxpayer is recommended before adopting the safe harbor.
If you have questions regarding how the safe harbor rule applies to your restaurant or store, contact Rob Haggerty, Partner, Tax Services.