Tax Reform Discussion Draft Released to Simplify Depreciation

In April, Senator Ron Wyden (D-OR) released a cost recovery reform and simplification discussion draft that would repeal our current depreciation method for assets used in business.  Currently, deprecation is calculated under The current method of accelerated asset depreciation in the United States is known as the Modified Accelerated Cost Recovery System (MACRS). MACRS divides all assets into classes which dictate the number of years over which an asset's cost will be recovered. MACRS (Modified Accelerated Cost Recovery System).  This proposal would repeal The current method of accelerated asset depreciation in the United States is known as the Modified Accelerated Cost Recovery System (MACRS). MACRS divides all assets into classes which dictate the number of years over which an asset's cost will be recovered. MACRS and replace the schedules with six individual pooling methods into which similar tax life assets are grouped together (pooled) and depreciated as a group of assets.  Accruit, along with several of our association partners, were given an overview of the plan and asked for feedback prior to the release.

At a high level, pooling doesn’t sound like a bad idea; there are six buckets and an inclusive structure for like-kind exchanges without the requirements that burden today’s taxpayer. But closer analysis of the draft bill yields some concerns. Tracking detailed information at an asset-level is standard operating procedure and not considered an extra burden by the majority of Accruit’s clients who made  investments years ago into systems that provide the asset-level tracking required in many types of businesses (leasing, for instance) and by most states.

The following, provided by PwC, presents a detailed overview of the discussion draft. I will keep you apprised of ongoing discussion with our 1031 Coalition partners, Senate Finance Committee members, and others as I coordinate further commenting on the draft proposal.

Senate Finance Committee examines business tax reform issues; Ranking Member Wyden releases draft cost recovery tax reform bill

^{Photo of Senator Wyden by Sam Craig}