A Tangible Property Regulation (TPR) study is an analysis that focuses on examining a company’s compliance with the Tangible Property Regulations. These regulations, which were significantly updated in 2013 through 2015, provide guidelines for businesses to properly account for their expenditures related to tangible property, like real estate and equipment.
The main objective of a TPR study is to ensure that a company accurately classifies its costs, distinguishing between capital expenditures (which are typically depreciated over time) and deductible repair and maintenance expenses. By doing so, businesses can potentially uncover tax savings, minimize audit risk, and improve overall tax planning strategies.
A TPR study is usually conducted by tax professionals or consultants who are well-versed in the regulations. They closely examine a company’s financial and tax records, identify any misclassifications, and recommend necessary adjustments to ensure compliance with the rules.
A business should consider conducting a TPR study in the following situations:
If a business has recently undertaken significant renovations or improvements to its tangible property, a TPR study can help ensure that expenses are properly classified between capital expenditures and deductible repair and maintenance costs.
When a company acquires or disposes of tangible assets, a TPR study can help identify any tax-saving opportunities and ensure accurate asset accounting.
To minimize the risk of issues arising during an IRS audit, it’s a good idea to conduct a TPR study beforehand to ensure compliance with the regulations and identify potential errors or misclassifications.
Not all states conform to federal bonus depreciation. A TPR study may allow a business to deduct costs immediately for state income tax purposes that would otherwise be capitalized and depreciated.
Depending on their CapEx plans, businesses should consider conducting a TPR study periodically to ensure continued compliance with the regulations and to make necessary adjustments based on changes in business operations or tax laws. Studies may need to be every few years or even every quarter.
Keep in mind that each business’s situation is unique, so the best time to conduct a TPR study may vary. Consulting with a tax professional or accountant can help determine the most appropriate time for a TPR study based on your specific circumstances.