CALENDAR

Editor 's note: submit events, meetings, workshops and conferences at least one month in advance to cibm@news-gazette.com for inclusion in Mark Your Calendar.

Untitled < Aug Sep Oct >

September 7
Business Success Human Resource Seminars - Seminar 1: Recruiting and hiring right the first time 8:30 a.m.
Chamber Large Conference Room 1817 S. Neil St., Suite 201, Champaign These seminars are designed specifically for chamber members who are seeking quality, practical and affordable education on managing and grow their companies. Interested individuals can choose the sessions that are right for them -- or they can plan to attend all the sessions. Cost for chamber members is $32 per session or $145 for the entire series. Interested individuals can contact Norma Wesley at (217) 531-4679 or NormaW@champaigncounty.org.

September 9
Chamber breakfast 7:30 a.m.
Hawthorn Suites 101 Trade Centre Drive, Champaign Public affairs analyst Thom Serafin will discuss the November elections and their impact on Illinois.

September 9
Chamber ambassadors meeting 4 p.m.
Chamber Large Conference Room 1817 S. Neil St. Suite 201, Champaign For more information and to get involved, contact Paul Caravelli at PaulC@champaigncounty.org.

September 9
Project management certificate 6 to 9 p.m.
Class continues every Thursday through Dec. 16 Parkland College Business Training and Community Education 1315 N. Mattis Ave., Champaign This program assists in taking the PMP Certification Exam sponsored by the Project Management Institute. For additional exam requirements, visit the PMI website: www.pmi.org/CareerDevelopment/Pages/AboutPMIsCredentials.aspx Participants will be assigned a project to work on by the instructor. Upon successful completion, students receive a certificate of completion from Parkland College. Deadline to register is Sept. 2. Class fee is $1,895, including book. To register, call (217) 351-2235.

September 13
Community Spanish: A survival guide for English speakers 6 to 9 p.m.
Class continues Mondays until Oct. 11 Parkland College Business Training and Community Education 1315 N. Mattis Ave., Champaign Deadline to register is Sept. 7. Class fee is $225, including book and CD. To register, call (217) 351-2235.

September 13
Introduction to home inspection (Pre-licensing)
Class begins online on Sept. 13. Online sessions continue through Nov. 5. Classroom sessions are Saturdays 8 a.m. to 5 p.m., Sept. 18, 25, Oct. 2, 9, 30, Nov. 13 Parkland College Business Training and Community Education 1315 N. Mattis Ave., Champaign E-mail access and an Internet connection are required. Deadline to register is Sept. 6. Class fee is $1,275, including book. To register, call (217) 351-2235.

September 14
Business continuity management certification 9 a.m. to noon
Class continues Tuesdays and Thursdays through Nov. 18 Parkland College Business Training and Community Education 1315 N. Mattis Ave., Champaign Complete an online certification exam from the National Institute of Business Continuity Management as well as the requirements for the Professional Development Series offered by the Emergency Management Institute. Deadline to register is Sept. 7. Class fee is $1,995. To register, call (217) 351-2235.

September 14
Food service sanitation certification 5:30 to 9:30 p.m.
Class continues Tuesdays through Oct. 5. Test is Oct. 12. Parkland College Business Training and Community Education 1315 N. Mattis Ave., Champaign In addition to becoming state certified, candidates who successfully complete this course are eligible for the ServSafe food safety certification examination for an additional fee. Deadline to register is Sept. 7. Class fee is $105, not including book. To register, call (217) 351-2235.

September 16
Agribusiness Council 7:30 to 8:30 a.m.
Carle Development Foundation 911 E. University Ave., Urbana Contact Andrew Proctor, public policy manager, at andrewp@champaigncounty.org.

September 16
Correcting performance problems 8 a.m. to noon
Parkland College Business Training and Community Education 1315 N. Mattis Ave., Champaign Deadline to register is Sept. 9. Class fee is $125, including workbook. To register, call (217) 351-2235.

September 16
Business After Hours 5 to 7 p.m.
Benefit Planning Consultants 2110 Clearlake Blvd. Suite 200, Champaign Proceeds from the $5 per person donation at the door will help fund Chamber programs. The donation for non-members and guests is $8.

September 21
Business Success Human Resource Seminars - Seminar 2: Getting your new employee to quickly be productive and connected to your company 8:30 a.m.
Chamber Large Conference Room 1817 S. Neil St., Suite 201, Champaign Cost for Chamber members is $32 per session or $145 for the entire series. Interested individuals can contact Norma Wesley at (217) 531-4679 or NormaW@champaigncounty.org.

September 24
Building Operator Certification - Level 1 8 a.m. to 4 p.m.
Class continues Thursdays and Fridays: Oct. 8, 22, Nov. 4, 5, 19, Dec. 3, 17 Parkland College Business Training and Community Education 1315 N. Mattis Ave., Champaign All sessions are taught by MEEA instructors and require some out-of-class projects. Deadline to register is Sept. 17. Class fee is $1,250, including BOC certification exams and books. To register, call (217) 351-2235.

TAX PLANNING April 2010

Capital cost or repair?

The difference can mean tax savings

By Jeff Taylor
CIBM Contributor

The difference between deductible costs and capital expenditures can mean thousands of dollars in tax savings to property owners who perform regular repairs and maintenance. Recent legislation, tax court rulings and IRS revenue procedures allow taxpayers to more easily clarify the point not only for the current year, but also past tax years, creating an opportunity for significant current year tax savings.

Maintenance or capital improvements

The key question is when must a company capitalize an expenditure and when can the company treat those costs as deductible from current income?

Generally, taxpayers are required to capitalize expenditures that:

Substantially prolong life of the property
Materially increase the value of the property
Adapt property to a new or different use
"Put" the property into a useful condition

By contrast, taxpayers may be able to deduct expenditures for:

Routine maintenance
Incidental repairs
Equipment and materials that "keep" the property in an ordinary, efficient operating condition

In most cases, a taxpayer will pay less tax by classifying an expenditure as a repair and taking the current deduction, rather than capitalizing the expense and recovering the cost through depreciation. For this reason, it is often in the best interest of real property owners to reclassify costs formerly capitalized and depreciated in order to reduce their tax liability.

Here are a couple of examples of the subtle difference between repair and maintenance, and capital improvement.

To protect and maintain the concrete floors of its warehouse, ABC Distribution applies a new coat of epoxy sealer to the floor every year. This would typically be considered a deductible maintenance expense. However, if ABC Distribution purchases a previously occupied warehouse and applies the same epoxy sealer to the floor in preparation for occupancy, it would be considered a capital improvement and the cost would have to be depreciated. The same would apply if the warehouse expands: the initial cost of epoxy floor sealer would be considered a capital improvement in the first year, and a maintenance cost in subsequent years.

After 10 years of making these annual repairs, ABC decides to tear out the old asphalt and replace it with reinforced concrete that should last for 10 years without needing significant repairs. Expenditures for removing and replacing the material would have to be capitalized as a long-term improvement to the overall property.

Keep in mind that these are just examples, and other factors may lead to different conclusions. It's best to consult a tax professional to make sure all of the issues are covered before a determination is made.

Who can benefit?

Many capital intensive taxpayers have improperly classified maintenance and repair costs, creating numerous opportunities to retroactively reclassify certain expenditures in order to write off the remaining basis in the current tax year. Any taxpayer who has incurred significant building repairs and maintenance costs should consider analyzing their fixed asset costs.

To claim the deduction, the taxpayer must submit Form 3115 to change their accounting method, allowing the taxpayer to claim a "catch-up" deduction to be taken on the current year return for expenditures that occurred many years ago. Please note: This is a method change. Therefore all similar items must be treated in the same manner consistently across all years. The classification of an item as a capital item or a repair is dependent upon the facts and circumstances of the item.

Examples of deductible repair and maintenance expenses

Roof repairs
Parking lot resurfacing
Resurfacing floors
Replacing doors and windows
Painting

Jeff Taylor is a senior manager with Clifton Gunderson's federal tax consulting solutions team and has more than 10 years of tax consulting experience. He can be reached at (217) 351-7400 or Jeff.Taylor@cliftoncpa.com.