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North Bay Business Journal

Monday, January 7, 2013, 6:15 am

Tax Planning: IRS delays new tangible-property guidelines

Also: Sales taxes rise across state, North Bay

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    The Internal Revenue Service has delayed the release of a new set of guidelines clarifying the tax perks of certain building improvements, responding to an outpouring of opinions on the proposed regulation and giving property owners more time to plan for possible impacts.

    The final regulation clarifying tangible property rules, which was originally planned to be implemented on Jan. 1, will now be announced sometime this year and will become effective on Jan. 1, 2014.

    The rule seeks to clarify the manner by which the cost of certain building improvements qualifies for a federal tax deduction [See "IRS clarifies tax rules for building improvements," Sept. 10]. Litigation on the issue has reached as far as the U.S. Supreme Court, arguing the distinction between repairs — eligible for a full-value deduction in that same tax year — and capital improvements, which receive a tax deduction over several years along with the depreciable life of the asset.

     By bundling climate control and other building equipment into various systems for tax purposes, the clarification is generally expected to lead to an increase in long-term depreciation. Building owners would typically prefer the immediate tax benefit of work that is considered a repair.

    In recognition of existing efforts to comply with the new rules, the IRS will allow taxpayers the option to apply the temporary regulations to tax years beginning on or after Jan. 1, 2012, and up to the applicable date of the final regulation. The IRS has also identified sections of the proposed rule that are likely to change, with further information available through www.irs.gov.

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    California’s sales and use tax now stands at a base rate of 7.5 percent, following a decision by voters in November to pass a quarter-cent levy to support public education known as Proposition 30. The provision, which also includes an increase in income tax for taxpayers earning more than $250,000 per year, is estimated to generate $6 billion a year from 2013 through mid-2017 to pay for programs funded in the state budget. Most would go to K–12 schools, and the rest to community colleges.

    There is currently a tax rate of 8.25 percent for most of Sonoma County, with 8.5 percent in Sebastopol and 8.75 percent in Cotati, Rohnert Park, Santa Rosa and Sonoma. Marin is generally 8.25 percent, with 8.75 percent in Fairfax, Ignacio, Novato and San Rafael. The rate in Napa County is 8 percent. Solano County is 7.625 percent, with the exception of an 8.825 percent rate for Mare Island and Vallejo. Mendocino’s rate is 7.625 percent, with 8.125 percent in Point Arena, Ukiah and Willits and 8.625 percent in Fort Bragg. The majority of Lake County areas have the state base rate — 7.5 percent — with 8 percent in Clearlake, Clearlake Highlands, Clearlake Park and Lakeport.

    In addition, a new California law, Assembly Bill 1492, has added a 1 percent tax to lumber and engineered-wood products. The tax will generate $35 million in fiscal year 2013-14 for the Timber Regulation and Forest Restoration Fund, according to the state Board of Equalization.

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    (Clockwise from top left): Jenea Smith, Tammy Brenner, Randy Peace, Jennifer Kaye Smith, Tami Powers

    G&J Seiberlich & Co., based in Napa, cited increased business in the Napa Valley and Solano County as drivers in hiring four individuals. Jenea Smith, CPA, joined the firm as manager after nearly 20 years of experience in public accounting and small business consulting. Tammy Brenner, with 25 years of accounting experiences in a number of industries, joined as a staff accountant. Randy Peace also joined as a staff accountant, joining the industry after a career in the military. Tami Powers was hired as work flow coordinator, following experience in office administration and bookkeeping.

    Other firms adding staff include Petaluma-based Baldwin McGaughey & Co., which hired CPA Jennifer Kaye Smith as staff accountant. Santa Rosa-based Elliott & Phillips added Tamara Figlar as staff accountant, following nearly 20 years of experience that has included public accounting and work with the IRS.

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    Submit items for this column to eric.gneckow@busjrnl.com or call 707-521-4259.

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    Comments

    1 Comment

    1. January 10, 2013, 5:11 am

      by ramya divya

      Good update on the new regulation . I work for McGladrey and there’s a whitepaper on the new tangible assets regulation on the Website , readers will find it very helpful.


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