What Uniform Capitalization Rules Apply To Your Direct & Indirect Costs?

263A is a tax requirement for certain companies (over $25M in average gross receipts, adjusted for inflation) to identify costs associated with inventory and allocate those costs to their ending inventory balance for the year.

If you are subject to 263A, it is important to understand and review expenses that are involved with either producing or maintaining your inventory. For example, any facilities housing inventory would most likely need to include a portion of rent expense, utilities, etc. to their ending inventory computation under 263A. A 263A analysis assists in navigating this code section, identifying the most advantageous (and practical) approach to identifying and calculating the adjustment, and complying with any necessary filing requirements to either establish or modify a calculation.

Ensuring compliance with 263A can be a complicated and convoluted matter. By utilizing a tax professional, a practical and compliant methodology can be achieved. In addition, recent legislation has opened the door to potential simplification and favorable methodologies. If you haven’t reviewed or established a calculation, contact us today!

**Final regulations were issued (TD 9942) on December 23rd, providing additional clarification on the definition of a small business taxpayer for purposes of being exempt from the 263A requirements.

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Julie Helms, CPA | Director, Specialty Tax Services

The Lurie Difference: A Streamlined Process

Lurie’s Specialty Tax Services advisors offer unique tax savings and reduction strategies for businesses and their tax concerns. The team works closely with you and your service partners to provide counsel and execution on matters that extend far beyond compliance. This close collaboration provides not only coordinated, seamless service with specialists who have deep expertise, but also delivers true dollar cost savings. Here is what to expect: 

We Examine Your Indicators

Growth above $25M in gross receipts; change in operations, procedures, or expansion of locations or personnel while already completing a calculation; haven’t refreshed or reviewed calculation in some time

We Help You Uncover Benefits

Capitalization requirement of businesses over $25M of additional costs to ending inventory

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