The IRS and Treasury struggled to defend the $500 de minimis safe harbor deduction limit during a presentation at the ABA Tax Section meeting in Washington on Friday.
 
"We are sympathetic. We understand the amount is arbitrary," Ken Beck, taxation specialist in the Treasury's Office of Tax Policy, said. "The question is, what is the appropriate amount?"
 
What is readily apparent is that $500 is not the appropriate amount.
 
NSA and about 100 other commenters sent letters to the Internal Revenue Service seeking to raise the $500 safe harbor for deducting, rather than capitalizing and depreciating, tangible property expenses. Beck acknowledged that "no one" requested that the threshold be lowered or remain the same. Rather, Beck estimated most commenters wanted a threshold of about $2,500 to ease the administrative burden on small taxpayers.
 
Andrew Keyso, IRS associate chief counsel (income tax and accounting) appeared on the same panel as Beck at the ABA meeting, also acknowledge the IRS was surprised when even the AICPA asked the IRS to expand the definition of the applicable financial statement (AFS), such as a Securities and Exchange Commission filing or an audited shareholder statement, so that more taxpayers could use the higher $5,000 limit currently in place. However, Keyso stated it would be easier, and therefore more likely, for the IRS to change the safe harbor limit than update the AFS definition in the regulations. "We're still looking into whether we want to do this," Keyso said.
 
Most meeting participants, including NSA Executive Vice President John Ams, were left with the distinct impression the $500 limit would be raised to at least $2,500, if not more, at some point this year.
 
Beck also said clarifications to Revenue Procedure 2015-13, which consolidates and updates the procedures for making automatic and non-automatic accounting method changes, would be coming "shortly, but not imminently."