IRS "construction support"

The IRS recently held that a manufacturer did not have to capitalize, but instead could deduct, construction support payments that it made to its dedicated retailers. From a retailer’s point of view, this means that payments of this type cost the manufacturer less after tax and, as a result, should encourage such payments to be made.

In Chief Counsel Advice 201405014 (Sept. 12, 2013, released Jan. 31, 2014), a manufacturer provided construction support payments to its dedicated retailers to enable them to “incorporate seven critical image elements” into their stores. The retailers had to continue to sell the manufacturer’s products and maintain the store design for at least 15 years; otherwise, the construction support payments had to be returned to the manufacturer.Continue Reading IRS Rules Favorably on Construction Support Payments from a Manufacturer to Its Retailers