IRS's depreciation ruling due in November

ATLANTA - The National Golf Course Owners Association, along with accounting firm KPMG, is continuing to work with the Internal Revenue Service to achieve a favorable outcome in its two-year battle to update tax rules to allow for the depreciation of greens, bunkers and tees.

The issue, which has been fast-tracked as part of the IRS's newly created Industry Issues Resolution (IIR) pilot program, is set to be settled by November.

Besides an initial meeting with the IIR group in June, KPMG partner William Ellis organized a course visit for IRS officials in July. The group spent a day on the construction site at Drumm Farm in Independence, Mo. - a Hurdzan, Fry design that is being built by Landscapes Unlimited.

"We spent two and a half hours touring the course with the construction supervisor," said Ellis. "We were able to see greens, tees and bunkers at all stages of construction."

The complexity of the construction and the expensive nature of drainage systems are the basis for the NGCOA's depreciation position.

"They thought it was beneficial to see the construction methods which involve integrated drainage systems," Ellis said. "They have indicated that new guidance is being developed that will specifically address greens. The question now is whether the guidance will address other improvements such as bunkers."

According to Ellis, greens are very clear in the IRS's mind because modern construction consistently contains integrated irrigation and drainage systems.

"Most modern greens should be eligible for depreciation because of their nature of construction," he said. "Tees, however, may not. Many tees are still push-up and may not be eligible because they do not have integrated drainage."

The new guidance will be very factual in nature. It will not be a blanket decision for greens, tees or bunkers," added Ellis.

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