Industries

In order to create national awareness regarding certain IRS positions on tax depreciation of equipment for ethanol plants, RSM McGladrey recently participated in an ethanol industry team meeting at the U.S. Department of Treasury.

The specific issue in contention is whether ethanol plant equipment is properly classified and depreciated as five- or seven-year property for federal income tax purposes. Discussion centered on not only the technical tax matters at dispute, but also broader policy issues relative to the ethanol industry.

This issue is important to ethanol producers as a typical ethanol plant with a production capacity of 100 million gallons per year, receives a net present value benefit of approximately $2.5 million by using a five-year tax depreciable life as opposed to a seven-year tax depreciable life.

Attending the meeting on behalf of RSM McGladrey were Jason Zanderson and Lance Massmann, managing directors, Sioux Falls, S.D., and Jeff Johannesen, managing director, Des Moines, Iowa. Other participants included the Renewable Fuels Association’s president and legal counsel, and a representative from Archer Daniels Midland. 

The meeting was well received and both sides welcomed the opportunity to discuss their concerns. As a result, the income tax disputes have received a heightened level of awareness within the U.S. Treasury Department.

Further details on these developments will be communicated via Action Alerts published by the RSM McGladrey Ethanol Industry Team. If you would like to set up an appointment with an RSM McGladrey tax advisor to discuss this issue, please contact Cristina Hurley at 319.896.5415 or cristina.hurley@rsmi.com.

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