|
1913
|
The ratification of the 16th Amendment
to the Constitution codifies Federal
Income Tax. |
|
1934 |
Treasury requires taxpayers to prove that
useful lives are appropriate. |
|
1942
|
Bulletin F provides an
item-by-item list of useful lives. Based on
the nature of a taxpayer's business or
industry Bulletin F identified
over 5,000 assets used in 57 different
industries and activities and described two
procedures, the composite method and
component method, for computing
depreciation. |
|
1954
|
Accelerated depreciation in the form of
double declining balance and sum of years’
digits are approved, stimulating capital
investment in both plants and equipment. |
|
1959
|
In Shainberg vs. Commissioner,
the Tax Court ruled, and the IRS later
agreed, on the validity of component
depreciation. Individual components were
given specific useful lives, e.g., plumbing
and electrical were given a 15 year life. |
|
1962
|
Revenue Procedure 62-21, 1962-2 C.B.
418., superseded Bulletin F
and the item-by-item list of useful lives is
replaced by broad industry classes. The
preferred method of classifying assets
becomes the reserve ratio test. The
suggested useful lives are reduced 30-40% by
the new guidelines. This revenue procedure
was later revoked, except for class lives
that were incorporated into the Class Life
Asset Depreciation Range System (ADR), for
all years after 1970.
Congress enacted Code § 48 in
1962. The Investment Tax Credit (ITC) was
designed to encourage capital investment,
through modernization and expansion, in
production facilities. |
|
1971
|
Revenue Procedure 72-10, 1972-1 C. B.
721., enacted the ADR. The ADR
augments the industry classes with ranges
from which asset lives can be selected for
depreciation purposes. Originally meant for
machinery and equipment, the ADR system is
expanded to include buildings and land
improvements. It also abolished the
controversial reserve ratio test. The Class
Life System (CLS) is also created, to be
used for post-1970 depreciation of pre-1971
assets. |
|
1973
|
Revenue Ruling 73-410.
Taxpayers may utilize component
depreciation, on used or acquired
properties, if a qualified appraiser
properly allocates the costs between
depreciable property and non-depreciable
land. |
|
1975
|
Whiteco Industries Inc. vs.
Commissioner., is ruled on. The
Whiteco criteria are codified to
determine whether or not an asset is indeed
tangible personal property based on the
concept of inherent permanency. The
Whiteco criteria are:
-
Can the property be moved and has it
been moved?
-
Is the property designed or constructed
to remain permanently in place?
-
Are there circumstances that show that
the property may or will have to be
moved?
-
Is the property readily movable?
-
How much damage will the property
sustain when it is removed?
-
How is the property affixed to land?
|
|
1981
|
IRC § 168 introduces the
Accelerated Cost Recovery System (ACRS) ACRS
was designed to provide a less complicated
method for computing depreciation by
eliminating salvage value and specifying
recovery periods for various classes of
assets. In contrast to the elective ADR
system, ACRS was mandatory and provided only
five (later six) recovery periods. ACRS also
allowed for a faster write-off of assets
than had been allowed under previous rules
(e.g., the 40-year life for real property
was reduced to a 15, 18, or 19-year recovery
period, as reflected by the 1985 amendments
to ACRS). |
|
1986
|
The ITC is repealed. ACRS is replaced by The
Modified Accelerated Cost Recovery System (MACRS).
Real property recovery is now 27.5 years for
residential rental property and 31.5 years
for most other depreciable real property. |
|
1987 |
Revenue Procedure 87-56 delineated new class
lives and recovery periods for MACRS. |
|
1993
|
Omnibus Budget Reconciliation Act extended
MACRS recovery period for non-residential
real property from 31.5 to 39 years. |
|
1997
|
Hospital Corporation of America vs.
Commissioner validates cost
segregation, reinforcing the use of ITC
methodologies and precedents as applicable
to determining depreciation. |
|
1999
|
The IRS acquiesced the use of ITC rules for
distinguishing § 1245 property from § 1250
property as decided in Hospital Corp
of America. The IRS Chief Counsel
issued additional guidance in CCA
19992145. |
|
2002
|
The Job Creation and Worker Assistance
Act of 2002, tried to stimulate the
economy by provides the incentive of
30-percent additional first year bonus
depreciation allowance pursuant to § 168(k) |
|
2003
|
The Jobs and Growth Reconciliation Tax
Act of 2003 increased the bonus
depreciation under § 168(k) to 50 percent
for certain qualifying property acquired
after May 5, 2003, and placed in service
before January 1, 2006. Additionally § 1400L
creates special provisions for certain
qualifying property used by a business in
the New York Liberty Zone. |
|
2004 |
Cost Segregation Audit Techniques
Guide is issued by the IRS to assist
agents in reviewing cost segregation
studies. It provides an understanding of the
IRS’s point of view towards particular
assets, defines various methodologies, and
outlines key components of a quality cost
segregation study.
The American Jobs Creation Act of 2004,
P.L. 108-354., provided incentives through a
new 15-year, straight-line recovery period,
effective after 10-22-2004 through
12-31-2005, for qualifying leasehold
improvements and qualifying restaurant
property. It also extended increased § 179
limits through 2008; extended shorter
recovery periods for Indian reservation
property for one more year, etc… |
