Tax Break

What is a roof? The IRS needs to know

February 24, 2012

Actor Paul Newman (L) and Elizabeth Taylor are shown in this undated publicity photograph from their 1958 film "Cat On A Hot Tin Roof." REUTERS/Handout (UNITED STATES)

“Maggie ‘the Cat’: You know what I feel like? I feel all the time like a cat on a hot tin roof.  (from Tennessee Williams, “Cat on a Hot Tin Roof”)

The Internal Revenue Service has its own problem with roofs these days. An IRS employee in Atlanta sent a letter last week to his own agency asking what exactly qualifies as a roof. Shingles? A waterproof cover?

Why, you ask, does the IRS need to specify what is a roof? It matters for accounting purposes.

In December, the IRS issued new rules to clarify the difference between a business expense that is a repair and tax-deductible and one that is an improvement but not deductible right away.

So when it matters for tax purposes whether you’re fixing or improving your roof, you have to know what a “roof” is.

The roof, not-a-roof dilemma illustrates the challenge IRS faces in applying repair regulations. They must be broad enough to be meaningful, yet specific enough to keep the accountants honest.

The letter, written by Roy Nixon, notes that the IRS is giving the public conflicting messages on roof repairs.

“The Temporary Regulations contain contradictory examples and discussions about when the cost related to the roof should be deductible.”

Is waterproofing a major component of the roof? Right now it’s unclear.

“To state that the waterproofing is not a major component ignores reality.”

“We ask for clarification.”

Nixon said he could not comment on the letter. He referred questions to IRS public affairs, which said it does not comment on comment letters.

The 255 pages of regulations are temporary, meaning the IRS can edit the rules if sufficiently persuaded by the business community.

Comments on the repairer regulations are due by March 26, 2012. A public hearing has been scheduled for April 4, 2012.

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