Regulation · 2018
REG-104397-18 (First TCJA Bonus Proposed Regs)
REG-104397-18, 83 Fed. Reg. 39292 (Aug. 8, 2018)
IRS proposed regulation
Audio summary
A short audio walkthrough of this rule: what it says and why it matters for your study.
What it holds
REG-104397-18 was the first set of proposed regulations under TCJA for the Section 168(k) bonus deduction. It defined which property qualifies, established the used-property rules, and explained the binding-contract and placed-in-service timing rules. These proposals were adopted, with modifications, as T.D. 9874 in September 2019.
Why it matters for your study: This proposed rule was the first detailed framework for cost segregation component bonus eligibility under the new TCJA rates. Studies prepared between August 2018 and September 2019 relied on it while the final regulations were pending.
Where this comes from
The Tax Cuts and Jobs Act of 2017 created a new version of bonus depreciation. The new rules were complex and taxpayers needed guidance on how to apply them.
On August 8, 2018, the IRS published REG-104397-18 at 83 Fed. Reg. 39292. This was the first proposed regulation addressing the new Section 168(k) rules. It was open for comment while studies were already being prepared under the new TCJA rates.
What it established
The proposed rule addressed the same core issues later finalized in T.D. 9874: the definition of qualified property, the used-property acquisition rules, the binding-contract test, and the placed-in-service rules for self-constructed property.
Taxpayers could rely on the proposed regulations for property placed in service before T.D. 9874 was finalized, as long as they applied the rules consistently. This was a common approach for studies prepared in the 2018 and 2019 tax years.
What it does not mean
This proposed regulation was superseded by T.D. 9874 in September 2019. For property placed in service after T.D. 9874 was finalized, the final regulations control.
The proposed status also means that some of the rules were modified before they became final. If you are reviewing a study prepared under REG-104397-18, compare the rules applied against the modifications made in T.D. 9874 to make sure the study would still hold up under the final version.
Primary source
Read the official text for yourself, or share it with your advisor.
- Category
- Bonus depreciation & expensing
- Applies to
- All property types
- Status
- Vetted
This page explains a tax authority in plain words. It is not tax advice for your situation. The way this authority applies to your property is reviewed by a licensed tax professional. Citation is provided so you or your advisor can read the primary source.