IRS Ruling - Deduction Of ISO 9001 and TS 16949 Implementation Costs

[Marc]

I found this but couldn't find the info on the qualitytoday site. If anyone finds if, be kind and come back here and tell us where you found it.

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From: ISO Standards Discussion
Date: Mon, 10 Jan 2000 10:15:52 -0600
Subject: FYI: QA standards and IRS deductions /Bradley

Subject: FYI: QA standards and IRS deductions

Quality Today is publishing that the IRS is changing the rules for deducting certification costs. For more information, you can visit Quality Today's website at: **** DEAD LINK REMOVED **** I know this only affects the US participants, but it is a big enough thing, that I thought it should be published.

David Bradley
Michigan Manufacturing Technology Center

[Marc]

Date 1/6/00

Business granted deduction for QA standards Businesses will gain a new tax deduction for the costs of meeting international quality standards under a ruling by the Internal Revenue Service, which reversed its previous position. The decision Thursday involves a series of quality guidelines known as ISO 9000 that businesses around the world use for goods and services. Companies get certified by the International Organization for Standardization by documenting their processes so all current and future employees will continue to meet the same standards.

The National Association of Manufacturers, the National Federation for Independent Business and other organizations petitioned the IRS in 1998 to permit companies to fully deduct the costs of gaining certification in a single year, instead of spreading the costs out over multiple years. Obtaining certification, the groups said in a joint letter, "can be both expensive and time consuming, particularly for small businesses." An average cost estimate was placed at $60,000.

The IRS ruling says that costs incurred by businesses to "obtain, maintain and renew" the certification will now be fully tax deductible in one year, except for certain long-term costs such as creation of a company manual.

[Marc]

ALSO SEE: Depreciating ISO Registration Costs and Revenue Ruling 2000-4 allows costs incurred by businesses to deduct certain qualifying expenses in one year.

Try The Elsmar Cove Free Files Directory - Look for "IRS-Deduction.pdf"

[Linda W]

I had this site saved in my "favorites" file in case I needed it.
**DEAD LINK REMOVED**

[Marc]

I wonder where they got the $60,000 figure...

This is another one I'm wondering what the status is. Anyone seen or heard anything from your finance people about deductabiliy? I'd love to know how to really go about determining costs, especially in-house labour. Any thoughts, folks?

[Jim Biz]

Our Finance group confirmed that we turned the information on the issue into our main tax accouting people... but as for how it was handled - how much was deducted - or how labour was factored in - I can't help.

[gpainter]

This rule can be found in 26 CFR1.162-1 : Business Expenses. Rev. RUL. 2000-4.

You can also call Kim Koch at the Office of Assistant Chief Counsel (Income Tax and Accounting) regarding this revenue ruling at 202-622-4950

[hrrvett]

This is the latest information that I have run across. Sorry if this is duplicate information. Ultimately, it says that monies expensed for certification can be deducted. (not sure if employee hours can be justified or just the certification fees for the registrar) There are no forms - just the act of remembering to deduct these fees during tax season.

I hope this helps!

It can be found in the IRS regulations under 26 CFR Part 1.263(a)-4 and example 4 under that heading. I am attempting to attach a file and have included the text below for convenience.

(4) Certain memberships and privileges—(
i) In general. A taxpayer must
capitalize amounts paid to an organization
to obtain, renew, renegotiate, or
upgrade a membership or privilege
from that organization. A taxpayer is
not required to capitalize under this
paragraph (d)(4) an amount paid to obtain,
renew, renegotiate or upgrade
certification of the taxpayer’s products,
services, or business processes.
(ii) Examples. The following examples
illustrate the rules of this paragraph
(d)(4):

Example 4. Business process certification. Z
corporation, a manufacturer, seeks to obtain
a certification that its quality control standards
meet a series of international standards
known as ISO 9000. Z pays $50,000 to an independent
registrar to obtain a certification
from the registrar that Z’s quality management
system conforms to the ISO 9000 standard.
Z’s payment is an amount paid to obtain
a certification of Z’s business processes and
is not required to be capitalized under this
paragraph (d)(4).