Rev Proc 2016-23, 2016-16 IRB
IRS has released the inflation-adjusted Code Sec. 280F depreciation limits for business autos, light trucks and vans (including minivans) placed in service by the taxpayer in 2016, as well as the annual income inclusion amounts for such vehicles first leased in 2016. It has also released new and revised tables for vehicles placed in service in 2015, to reflect 2015 legislation that retroactively extended the rule allowing additional first year depreciation for vehicles.
Year-by-year limits for 2016. There are four sets of dollar limits for vehicles placed in service by the taxpayer in 2016. Two are for passenger autos that are not trucks or vans and are subject to the luxury-auto limits of Code Sec. 280F (they are rated at 6,000 pounds unloaded gross vehicle weight or less). One set of limits applies to autos for which the bonus depreciation rules don’t apply under Code Sec. 168(k) (the auto is pre-owned or not used more than 50% for business, the taxpayer elects out of Code Sec. 168(k) or elects to increase its Code Sec. 53 alternative minimum tax (AMT) credit limit instead of claiming bonus first year depreciation); the other set of limits applies to autos for which the bonus depreciation rules do apply.
There also are two sets of limits for light trucks or vans (passenger autos built on a truck chassis, including minivans and sport-utility vehicles (SUVs) built on a truck chassis) that are subject to the luxury-auto limits (they are rated at 6,000 pounds gross (loaded) vehicle weight or less). (Code Sec. 280F(d)(5)(A)) One set of limits applies to light trucks and vans for which the bonus depreciation rules don’t apply under Code Sec. 168(k); the other set of limits applies to light trucks and vans for which the bonus depreciation rules do apply. Certain non-personal-use vehicles are exempt from the luxury auto limits regardless of their weight.
The following are the annual depreciation dollar caps for vehicles that are subject to the luxury-auto limits of Code Sec. 280F and placed in service by the taxpayer in calendar year 2016.
If the bonus first year depreciation rules don’t apply to an auto (not a truck or van):
…$3,160 for the placed in service year;
…$5,100 for the second tax year;
…$3,050 for the third tax year; and
…$1,875 for each succeeding year.
If the bonus depreciation rules do apply to an auto (not a truck or van):
…$11,160 for the placed in service year;
…$5,100 for the second tax year;
…$3,050 for the third tax year; and
…$1,875 for each succeeding year.
RIA observation: For autos first placed in service in 2016, the dollar figures for all tax years are the same as those that applied for autos placed in service in 2015.
If the bonus depreciation rules don’t apply to a light truck or van (passenger auto built on a truck chassis, including minivan and sport-utility vehicle (SUV) built on a truck chassis):
…$3,560 for the placed in service year;
…$5,700 for the second tax year;
…$3,350 for the third tax year; and
…$2,075 for each succeeding year.
If the bonus depreciation rules do apply to a light truck or van:
…$11,560 for the placed in service year;
…$5,700 for the second tax year;
…$3,350 for the third tax year; and
…$2,075 for each succeeding year.
RIA observation: For a light truck or van placed in service in 2016, all of the dollar figures are $100 more than for such vehicles first placed in service in 2015, except the third year amount is unchanged from 2015.
RIA caution: The dollar limits must be reduced proportionately if business/investment use of a vehicle is less than 100%.
RIA observation: Heavy SUVs—those that are built on a truck chassis and are rated at more than 6,000 pounds gross (loaded) vehicle weight—are exempt from the luxury-auto dollar caps because they fall outside of the Code Sec. 280F(d)(5) definition of a passenger auto.
Lease income inclusion tables. A taxpayer that leases a business auto may deduct the part of the lease payment representing business/investment use. If business/investment use is 100%, the full lease cost is deductible. So that lessees can’t avoid the effect of the luxury auto limits, however, they must include a certain amount in income during each year of the lease to partially offset the lease deduction, if the vehicle’s fair market value exceeds certain dollar limits. (Code Sec. 280F(c)) The income inclusion amount varies with the initial fair market value of the leased auto and the year of the lease, and is adjusted for inflation each year.
Tables 5 and 6 of Rev Proc 2016-23, carry the income inclusion tables for passenger autos with a lease term beginning in 2016 and a fair market value over $19,000, and light trucks and vans with a lease term beginning in 2016 with a fair market value over $19,500.
RIA observation: The income inclusion amounts for vehicles first leased this year are higher than they were for vehicles first leased last year. For example, for an auto with a fair market value over $37,000 but not over $38,000, and first leased in 2016, the income inclusion amounts are $39 for the first tax year during the lease, $85 for the second tax year, $127 for the third, $151 for the fourth, and $174 for the fifth and later lease years. If the same auto was first leased in 2015, the income inclusion amounts are $31 for the first tax year during the lease, $68 for the second tax year, $102 for the third, $121 for the fourth, and $139 for the fifth and later lease years.
New and amended 2015 tables. When Rev Proc 2015-19, 2015-8 IRB 656 (see Weekly Alert ¶ 5 02/12/2015), the revenue procedure that provided limits, etc. regarding autos, etc. placed in service in 2015, was issued, the bonus additional first-year depreciation rules for autos, light trucks and vans only applied to vehicles placed in service before Jan. 1, 2015. (former Code Sec. 168(k)(2)(A)(iv)) Section 143(a) of the Protecting Americans from Tax Hikes Act of 2015 (the Act) retroactively extended the additional first year depreciation deduction under Code Sec. 168(k) to qualified property placed in service in 2015.
Accordingly, Tables 7 and 8 of Rev Proc 2016-23 update Rev Proc 2015-19, by providing depreciation limitations for passenger automobiles placed in service during calendar year 2015 for which the Code Sec. 168(k) additional first year depreciation deduction, as extended by Section 143(a) of the Act, applies.Rev Proc 2016-23 also revises the lease inclusion tables, Tables 3 and 4, of Rev Proc 2015-19 for passenger automobiles first leased by the taxpayer in calendar year 2015. Where the bonus depreciation rules don’t apply to an auto, truck or van, the annual depreciation dollar caps for vehicles placed in service in calendar year 2015 are the same as were previously published in Rev Proc 2015-19.
The following are the annual depreciation dollar caps for vehicles that are subject to the luxury-auto limits of Code Sec. 280F and placed in service by the taxpayer in calendar year 2015, if the bonus depreciation rules apply to an auto (not a truck or van):
…$11,160 for the placed in service year;
…$5,100 for the second tax year;
…$3,050 for the third tax year; and
…$1,875 for each succeeding year.
The following are the annual depreciation dollar caps for vehicles that are subject to the luxury-auto limits of Code Sec. 280F and placed in service by the taxpayer in calendar year 2015, if the bonus depreciation rules apply to a light truck or van:
…$11,460 for the placed in service year;
…$5,600 for the second tax year;
…$3,350 for the third tax year; and
…$1, 975 for each succeeding year.
References: For business auto depreciation limits, see FTC 2d/FIN ¶ L-10001; United States Tax Reporter ¶ 280F4 ; TaxDesk ¶ 267,620; TG ¶ 14282. For income inclusion amounts for business auto lessees, see FTC 2d/FIN ¶ L-10200; United States Tax Reporter ¶ 280F4; TaxDesk ¶ 267,631; TG ¶ 14291.
