Business Personal Property Update
- What is the procedure for assessing Business Personal Property?
- How are Recovery Periods determined under 137.122 RSMo?
- Where can I find the IRS Publication 946?
- What types of business personal property are found in the different recovery periods?
- Is there an alphabetical listing of Business Personal Property Groups?
What is the procedure for assessing Business Personal Property?
In 2005, §137.122, RSMo was enacted into law to provide for uniform assessment of business personal property beginning in 2007 for property put into service after January 1, 2006. To establish the assessment under that section, the following process must be followed:
- The original cost paid by the current owner, less freight, installation, and sales or use taxes and date of purchase is reported by the owner. Assessors may access sample forms at moassessorsassn.org/ in the "Assessor Use Only" section.
- The Class Life and Recovery period is determined by using IRS Publication 946, Appendix B, Table B-1 & B-2 – Table of Class Lives and Recovery Periods (see cite to IRS internet source below).
- The assessor applies the proper depreciation schedule found in §137.122.3, RSMo, by applying the years since acquisition and the appropriate recovery period to determine the appraised value.
- The appraised value is multiplied by the statutory assessment level for personal property, 33 1/3% to establish the assessed value.
Example : To determine the 2007 value of a special mold used for manufacturing motor vehicles, bought in February 2006 for $100,000 the process would be as follows:
- The cost and acquisition date is reported by the owner.
- A recovery period of 3 years is determined (Asset Class 37.2) by using Publication 946.
- Because the statute instructs that "the percentage shown for the first year shall be the percentage of the original cost used for January first of the year following the year of acquisition," a depreciation factor of 75% is used. In other words, by using the table in section 137.122.3, and applying a Recovery Period 3 and using Year 1, 75% is indicated. Then multiply 75% by the cost, $100,000, for an appraised value of $75,000.
- Multiply $75,000 by 33 1/3% (the assessment level) to determine an assessed value of $25,000.
How are Recovery Periods determined under 137.122 RSMo?
To assess business personal property (BPP) pursuant to §137.122, RSMo, an assessing officer must determine the recovery period for each item. The Class Lives and Recovery Periods found in IRS Publication 946, Appendix B, Table B-1 & B-2 – Table of Class Lives and Recovery Periods provide the information necessary to establish these recovery periods. They are identified as GDS (MACRS) in Publication 946, where a detailed description of each of the asset classes can be found. To determine exactly how BPP should be depreciated, it is necessary to read the exact description from Publication 946, pages 98 through 107. An Adobe-Acrobat Reader is required to view, download, or print the publication. To access Publication 946, go to www.irs.gov/pub/irs-pdf/p946.pdf.
The State Tax Commission, utilizing IRS Publication 946, has provided a quick reference in two formats:
- List of BPP Groups by Recovery Period The recovery periods established by §137.122, RSMo are 3, 5, 7, 10, 15 and 20 years. Accordingly, the first listing covers various groups of BPP organized by the length of the recovery periods applicable under MACRS. The depreciation factors (percent good of price paid by current owner for the item without freight, installation, or sales or use tax) established by §137.122, RSMo applicable to each group are also provided. The percent good factor is simply determined by matching the recovery period with the years since placed in service.
- Alphabetical Listing of BPP Groups The second listing provides each type of property alphabetically followed by the Asset Class numbers and recovery period for that type of asset.
NOTE: The listings are abbreviated versions of the more detailed descriptions found in Publication 946. That publication must be consulted to accurately determine recovery periods.
To view the listings, go to the www.stc.mo.gov, click on FAQs and then click on question & 4 for the List of BPP Groups by Recovery Period or click on question # 5 for the Alphabetical Listing of BPP Groups.
Where can I find the IRS Publication 946?
What types of business personal property are found in the different recovery periods?
Link to business personal property by recovery period (PDF document)
Is there an alphabetical listing of Business Personal Property Groups?
Link to alphabetical listing of Business Personal Property Groups (PDF document)