McLEAN, Va. -

The National Automobile Dealers Association reminded members this week they must change their accounting method to comply with the tangible property regulations mandated by the Internal Revenue Service.

NADA explained these regulations generally govern whether expenditures on tangible property may be expensed or must be depreciated. These rules are generally effective with the filing of 2014 tax returns. 

The association mentioned the IRS has released Revenue Procedure 2015-20, which provides relief for small-business taxpayers who adopt these new rules.  The relief applies to any separate trade or business of a taxpayer that has total assets of less than $10 million or average annual gross receipts of $10 million or less for the three prior years.  

“This may apply to some dealerships and many related entities such as real estate companies,” NADA said. “The revenue procedure allows small-business taxpayers to make changes in methods of accounting associated with the tangible property regulations without filing Form 3115. 

A fact sheet on the IRS guidance has been prepared for NADA by the dealer accounting firm Crowe Horwath. The fact sheet is available here.

“Dealers currently working with their tax preparers to adopt the regulations are encouraged to discuss the applicability of this new simplification provision,” NADA said.