Magazine Article

Understanding the safe harbor for ratable service contracts

Peterson, Kari, Pentland, Peter

2016

نظرة عامة

On July 30, 2015, the IRS issued Rev. Proc. 2015-39, which provides a safe harbor for accrual-basis taxpayers that would like to treat economic performance as occurring ratably over the term of certain types of service contracts (ratable service contracts). Many practitioners likely first familiarized themselves with the term \"ratable service contract\" upon reading this guidance. Some may still be questioning what the revenue procedure provides to taxpayers that was not previously available. The answer to that question is the focus of this discussion. A ratable service contract must meet three requirements to qualify for the safe harbor: (1) The contract must provide for similar services to be provided on a regular basis (daily, weekly, or monthly); (2) each occurrence of the service must provide independent value, meaning that the benefits from each occurrence must not depend on the receipt of prior or subsequent services; and (3) the contract must not exceed 12 months. A contract containing both qualifying and nonqualifying services must contain separate pricing for a taxpayer to apply the safe harbor to those services that qualify.

• الناشر: American Institute of CPA's,American Institute of Certified Public Accountants
• موضوع: Extended warranties / Financial statements / Laws, regulations and rules / Maintenance contracts / Performance (Law) / Safe harbor / Safe harbor (Taxation) / Taxation / Taxpayers