Contact Us

Raise the BAR with Veritax Advisors Next-Level TPR Compliance Services

A. Chris Ostler, CPA

July 26, 2022

Tangible Property Regulations compliance services are best rendered by an engagement team made up of skilled tax professionals to interpret the latest tax laws and engineers to truly comprehend the building envelope including all its components and systems. The purpose of the “BAR” test is to determine whether the costs incurred for repair and maintenance expenditures should be expensed or capitalized. The “BAR” test encompasses three critical components for analysis: Betterment, Adaptation, and Restoration. At Veritax Advisors, we have engagement teams comprised of leading tax professionals and engineers that work seamlessly together to ensure we optimize sustainable deductions while reducing compliance risk through systematic qualitative and analytical quantitative phases ranging from feasibility to assessment to implementation and execution. 

Raise the “BAR

The “B” is for Betterment and the most common types of betterment are simply improvements that make a property better. Assets that will increase the physical space or capacity of a property, or will increase the efficiency, strength, productivity or quality of the property are all considered betterments and must be capitalized. For example, strengthening a rooftop to add additional bearing weight for additional HVAC units and solar panels to be placed on the rooftop betters the roof and these costs must be capitalized.

The “A” is for Adaptation and improvements are considered an adaptation if it adapts the “Unit of Property” (“UoP”) to a use other than the original use of the UoP at the time the building was placed in service. The classic example of an adaptation highlighted in the treasury regulations considers a taxpayer who opens a manufacturing facility, which functions for several years manufacturing goods. The taxpayer decides to take a portion of the manufacturing space and convert it into to sales showroom space. The costs required to modify the building would be considered adaptations, since they are adapting a portion of the property to a different use – a showroom – and must be capitalized. 

The “R” is for Restoration and costs are deemed a restoration if it is paid for the:

  • Replacement of a component of property after the taxpayer deducted a loss for that component;
  • Replacement of a property component that was sold, assuming the taxpayer has adjusted the basis of the component based on gain/loss realized from the sale;
  • Replacement of a property component after the taxpayer claimed casualty loss;
  • Restoration of a property component to like-new condition, after the end of its class life; or
  • Replacement of a major component or significant portion of a UoP, building system, or subset of UoP that has its own discrete function (i.e., more on this next time).

Costs incurred when returning a property component to its ordinary operating condition would also be considered restorations and would consequently require capitalization. It’s important to note that this doesn’t refer to normal maintenance performed to manage normal wear and tear such as repairing rooftops so that they can be maintained over their useful class lives. In contrast, if a rooftop is restored to “like-new” condition, then these costs would need to be capitalized. 

Please schedule your complimentary consultation today with one of our engineers to raise the bar for next-level client service at 

Tax Planning

The Federal-Level R&D Tax Credit Program remains a top priority on the Hill

Tax Planning

BREAKING: The IRS Issues New Administrative Authority Governing Cost Segregation Studies

Tax Planning

The IRS Issues New Administrative Authority Governing the I.R.C. § 179D deduction for Building Envelope Efficiency

Let’s Connect

Start by scheduling a meeting for a free consultation. Let’s talk about the specialty tax programs that can equate to significant savings.