AICPA to IRS: Increase Small Business Safe Harbor Threshold in Tangible Property Regulations 

Published April 23, 2015

Stack of paperThe American Institute of CPAs (AICPA) recommended to the Internal Revenue Service (IRS) that the de minimis safe harbor threshold amount under the tangible property regulations for small business taxpayers without an applicable financial statement (AFS) be increased from $500 to $2,500.  The AICPA conducted an informal survey last year to gather information from members about the impact of the rules on clients and incorporated their input into the recommendations that were submitted. 

“The AICPA believes the requirement that a taxpayer have an AFS to use the $5,000 de minimis threshold unfairly discriminates against smaller taxpayers, and recommends an alternative test to allow such taxpayers to use the de minimis rule,” Troy K. Lewis, CPA, CGMA, chair of the AICPA Tax Executive Committee, wrote in the April 21 letter.

The AICPA recommended that the Treasury Department expand the definition of an approved AFS to include a reviewed set of financial statements, which are in accordance with Statements on Standards for Accounting and Review Services and provide reasonable assurance that there are no material modifications that have been made or should be made for them to be in conformity with the applicable financial reporting framework. 

Lewis explained that outside third parties, such as banks and creditors, often rely on reviewed financial statements to provide them comfort in the financial statements of a company.

“We also recommend adjusting the threshold amount on an annual basis for inflation to maintain the fairness and incentive of the intended benefit, and to expand the AFS definition to allow more taxpayers to benefit from the higher $5,000 threshold,” Lewis wrote.




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