IRS Releases Safe Harbor Revenue Procedure For Cable System Operators

The IRS recently issued a revenue procedure (Rev. Proc. 2015-12) that provides taxpayers with several alternative safe harbor approaches for determining whether expenditures to maintain, replace or improve cable network assets must be capitalized under Section 263(a) and special rules for depreciation.

One of the safe harbors for determining whether expenditures are repairs or improvements is similar to the safe harbor issued for wireline telecommunications networks in Rev. Proc. 2011-27. Alternatively, the guidance provides safe harbor units of property within an individual cable system for purposes of Section 263(a). The new revenue procedure also provides two alternative methods for determining whether costs for installations and customer drops may be deducted as repairs under Section 162 or must be capitalized as improvements under Section 263(a).