rp-16-23.pdf

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26 CFR 601.105: Examination of returns and claims for refund, credit, or abatement;
determination of correct tax liability.
(Also: Part I, §§ 280F; 1.280F-7.)

Rev. Proc. 2016-23

SECTION 1. PURPOSE
This revenue procedure provides: (1) limitations on depreciation deductions for
owners of passenger automobiles first placed in service by the taxpayer during calendar
year 2016, including separate tables of limitations on depreciation deductions for trucks
and vans; (2) amounts that must be included in income by lessees of passenger
automobiles first leased by the taxpayer during calendar year 2016, including a
separate table of inclusion amounts for lessees of trucks and vans; and (3) revised
tables of depreciation limitations and lessee inclusion amounts for passenger
automobiles that were first placed in service or first leased by the taxpayer, respectively,
during 2015 and to which the 50-percent additional first year depreciation deduction
under § 168(k)(1)(A) of the Internal Revenue Code applies as extended by § 143(a) of
the Protecting Americans from Tax Hikes Act of 2015 (the Act), enacted as part of the
Consolidated Appropriations Act, 2016, Division Q, Pub. L. No. 114-113, ___ Stat. ___
(December 18, 2015). The tables detailing these depreciation limitations and lessee
inclusion amounts reflect the automobile price inflation adjustments required by
§ 280F(d)(7).

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SECTION 2. BACKGROUND
.01 For owners of passenger automobiles, § 280F(a) imposes dollar limitations on
the depreciation deduction for the year the taxpayer places the passenger automobile
in service and for each succeeding year. For passenger automobiles placed in service
after 1988, § 280F(d)(7) requires the Internal Revenue Service to increase the amounts
allowable as depreciation deductions by a price inflation adjustment amount. The
method of calculating this price inflation amount for trucks and vans placed in service in
or after calendar year 2003 uses a different CPI “automobile component” (the “new
trucks” component) than that used in the price inflation amount calculation for other
passenger automobiles (the “new cars” component), resulting in somewhat higher
depreciation deductions for trucks and vans. This change reflects the higher rate of
price inflation for trucks and vans since 1988.
.02 Section 168(k)(1) provides that, in the case of qualified property, the
depreciation deduction allowed under § 167(a) for the taxable year in which the
property is placed in service includes an allowance equal to 50 percent of the property’s
adjusted basis (hereinafter, referred to as Ҥ 168(k) additional first year depreciation
deduction”). Prior to the Act, § 168(k)(1) did not apply to property generally placed in
service after December 31, 2014. Section 143(b) of the Act extended the § 168(k)
additional first year depreciation deduction to qualified property (as defined in
§ 168(k)(2) after the amendments made by § 143(b)(1) of the Act) placed in service by
the taxpayer after December 31, 2015, and generally before January 1, 2020. The
§ 168(k) additional first year depreciation deduction percentage is 50 percent for
qualified property placed in service during calendar year 2016. Section 168(k)(2)(F)(i)

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and (iii), as amended by § 143(b)(1) of the Act, increase the first year depreciation
allowed under § 280F(a)(1)(A)(i) by $8,000 for passenger automobiles placed in service
by the taxpayer before January 1, 2018, and to which the § 168(k) additional first year
depreciation deduction applies.
.03 Tables 1 through 4 of this revenue procedure provide depreciation limitations for
passenger automobiles placed in service during calendar year 2016. Table 1
(passenger automobiles that are not trucks or vans) and Table 2 (trucks and vans)
provide depreciation limitations for passenger automobiles for which the § 168(k)
additional first year depreciation deduction, as amended by § 143(b) of the Act, applies.
Table 3 (passenger automobiles that are not trucks or vans) and Table 4 (trucks and
vans) provide depreciation limitations for passenger automobiles for which the § 168(k)
additional first year depreciation deduction, as amended by § 143(b) of the Act, does
not apply. The § 168(k) additional first year depreciation deduction, as amended by
§ 143(b) of the Act, does not apply for 2016 if the taxpayer: (1) acquired the passenger
automobile used; (2) did not use the passenger automobile during 2016 more than 50
percent for business purposes; (3) elected out of the § 168(k) additional first year
depreciation deduction pursuant to § 168(k)(7), as added by § 143(b)(6)(D) of the Act;
or (4) elected to increase the alternative minimum tax (AMT) credit limitation under
§ 53, instead of claiming the § 168(k) additional first year depreciation deduction, for
qualified property placed in service during 2016 pursuant to § 168(k)(4), as amended by
§ 143(b)(3) of the Act.
.04 Section 280F(c) requires a reduction in the deduction allowed to the lessee of a
leased passenger automobile. The reduction must be substantially equivalent to the

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limitations on the depreciation deductions imposed on owners of passenger
automobiles. Under § 1.280F-7(a) of the Income Tax Regulations, this reduction
requires a lessee to include in gross income an amount determined by applying a
formula to the amount obtained from a table. Table 5 applies to lessees of passenger
automobiles that are not trucks and vans and Table 6 applies to lessees of trucks and
vans. Each table shows inclusion amounts for a range of fair market values for each
taxable year after the passenger automobile is first leased.
.05 Section 143(a) of the Act extended the 50-percent additional first year
depreciation deduction under § 168(k) to qualified property (as defined in § 168(k)(2))
acquired by the taxpayer after December 31, 2007, and before January 1, 2016, if no
written binding contract for the acquisition of the property existed before January 1,
2008, and if the taxpayer places the property in service generally before January 1,
2016. Section 168(k)(2)(F)(i) increases the first year depreciation allowed under
§ 280F(a)(1)(A)(i) by $8,000 for passenger automobiles to which the § 168(k) additional
first year depreciation deduction applies. Accordingly, Tables 7 and 8 of this revenue
procedure update Rev. Proc. 2015-19, 2015-8 I.R.B. 656, by providing revised
depreciation limitations for passenger automobiles placed in service during calendar
year 2015 for which the § 168(k) additional first year depreciation deduction, as
extended by § 143(a) of the Act, applies. This revenue procedure also updates the
lease inclusion amounts in Tables 3 and 4 of Rev. Proc. 2015-19 for passenger
automobiles first leased by the taxpayer in calendar year 2015.
SECTION 3. SCOPE
.01 The limitations on depreciation deductions in section 4.01(2) of this revenue

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procedure apply to passenger automobiles (other than leased passenger automobiles)
that are placed in service by the taxpayer in calendar year 2016, and continue to apply
for each taxable year that the passenger automobile remains in service.
.02 The tables in section 4.02 of this revenue procedure apply to leased passenger
automobiles for which the lease term begins during calendar year 2016. Lessees of
these passenger automobiles must use these tables to determine the inclusion amount
for each taxable year during which the passenger automobile is leased. See Rev. Proc.
2011-21, 2011-12 I.R.B. 560, for passenger automobiles first leased during calendar
year 2011; Rev. Proc. 2012-23, 2012-14 I.R.B. 712, for passenger automobiles first
leased during calendar year 2012; Rev. Proc. 2013-21, 2013-12 I.R.B. 660, for
passenger automobiles first leased during calendar year 2013; Rev. Proc. 2014-21,
2014-11 I.R.B. 641, as amplified and modified by section 4.03 of Rev. Proc. 2015-19,
2015-8 I.R.B. 656, for passenger automobiles first leased during calendar year 2014;
and Rev. Proc. 2015-19, as amplified and modified by section 4.03 of this revenue
procedure, for passenger automobiles first leased during calendar year 2015.
SECTION 4. APPLICATION
.01 Limitations on Depreciation Deductions for Certain Automobiles.
(1) Amount of the inflation adjustment.
(a) Passenger automobiles (other than trucks or vans). Under
§ 280F(d)(7)(B)(i), the automobile price inflation adjustment for any calendar year is the
percentage (if any) by which the CPI automobile component for October of the
preceding calendar year exceeds the CPI automobile component for October 1987.
Section 280F(d)(7)(B)(ii) defines the term "CPI automobile component" as the

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automobile component of the Consumer Price Index for all Urban Consumers published
by the Department of Labor. The new car component of the CPI was 115.2 for October
1987 and 143.516 for October 2015. The October 2015 index exceeded the October
1987 index by 28.316. Therefore, the automobile price inflation adjustment for 2016 for
passenger automobiles (other than trucks and vans) is 24.6 percent (28.316/115.2 x
100%). The dollar limitations in § 280F(a) are multiplied by a factor of 0.246, and the
resulting increases, after rounding to the nearest $100, are added to the 1988
limitations to give the depreciation limitations applicable to passenger automobiles
(other than trucks and vans) for calendar year 2016. This adjustment applies to all
passenger automobiles (other than trucks and vans) that are first placed in service in
calendar year 2016.
(b) Trucks and vans. To determine the dollar limitations for trucks and vans
first placed in service during calendar year 2016, the Service uses the new truck
component of the CPI instead of the new car component. The new truck component of
the CPI was 112.4 for October 1987 and 155.035 for October 2015. The October 2015
index exceeded the October 1987 index by 42.635. Therefore, the automobile price
inflation adjustment for 2016 for trucks and vans is 37.9 percent (42.635/112.4 x 100%).
The dollar limitations in § 280F(a) are multiplied by a factor of 0.379, and the resulting
increases, after rounding to the nearest $100, are added to the 1988 limitations to give
the depreciation limitations for trucks and vans. This adjustment applies to all trucks
and vans that are first placed in service in calendar year 2016.
(2) Amount of the limitation. Tables 1 and 2 contain the dollar amount of the
depreciation limitation for each taxable year for passenger automobiles a taxpayer

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places in service in calendar year 2016. Use Table 1 for a passenger automobile (other
than a truck or van), and Table 2 for a truck or van, placed in service in calendar year
2016 for which the § 168(k) additional first year depreciation deduction applies. Use
Table 3 for a passenger automobile (other than a truck or van), and Table 4 for a truck
or van, placed in service in calendar year 2016 for which the § 168(k) additional first
year depreciation deduction does not apply.

REV. PROC. 2016-23 TABLE 1

DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES
(THAT ARE NOT TRUCKS OR VANS) PLACED IN SERVICE IN CALENDAR YEAR
2016 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION
DEDUCTION APPLIES

Tax Year Amount
1st Tax Year $ 11,160
2nd Tax Year $ 5,100
3rd Tax Year $ 3,050
Each Succeeding Year $ 1,875

REV. PROC. 2016-23 TABLE 2

DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN SERVICE IN
CALENDAR YEAR 2016 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR
DEPRECIATION DEDUCTION APPLIES

Tax Year Amount
1st Tax Year $ 11,560
2nd Tax Year $ 5,700
3rd Tax Year $ 3,350
Each Succeeding Year $ 2,075

REV. PROC. 2016-23 TABLE 3

DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES
(THAT ARE NOT TRUCKS OR VANS) PLACED IN SERVICE IN CALENDAR YEAR
2016 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION
DEDUCTION DOES NOT APPLY

Tax Year Amount

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1st Tax Year $ 3,160
2nd Tax Year $ 5,100
3rd Tax Year $ 3,050
Each Succeeding Year $ 1,875

REV. PROC. 2016-23 TABLE 4

DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN SERVICE IN
CALENDAR YEAR 2016 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR
DEPRECIATION DEDUCTION DOES NOT APPLY

Tax Year Amount
1st Tax Year $ 3,560
2nd Tax Year $ 5,700
3rd Tax Year $ 3,350
Each Succeeding Year $ 2,075

.02 Inclusions in Income of Lessees of Passenger Automobiles.
A taxpayer must follow the procedures in § 1.280F-7(a) for determining the
inclusion amounts for passenger automobiles first leased in calendar year 2016. In
applying these procedures, lessees of passenger automobiles other than trucks and
vans should use Table 5 of this revenue procedure, while lessees of trucks and vans
should use Table 6 of this revenue procedure.

REV. PROC. 2016-23 TABLE 5

DOLLAR AMOUNTS FOR PASSENGER AUTOMOBILES
(THAT ARE NOT TRUCKS OR VANS)
WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2016

Fair Market Value of
Passenger Automobile

Tax Year During Lease

Over

Not Over

1
st

2
nd

3
rd

4
th

5
th
& later

$19,000 $19,500 6 13 20 23 27
19,500 20,000 7 15 23 27 30
20,000 20,500 8 17 26 30 35
20,500 21,000 9 19 29 33 39
21,000 21,500 10 21 31 38 42
21,500 22,000 11 23 34 41 47
22,000 23,000 12 26 39 46 53
23,000 24,000 14 30 44 54 60

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24,000 25,000 16 34 50 60 69
25,000 26,000 17 38 56 67 78
26,000 27,000 19 42 62 74 85
27,000 28,000 21 46 68 81 93
28,000 29,000 23 50 73 89 101
29,000 30,000 25 53 80 95 110
30,000 31,000 26 58 85 102 118
31,000 32,000 28 62 91 109 126
32,000 33,000 30 65 98 116 134
33,000 34,000 32 69 103 123 142
34,000 35,000 34 73 109 130 150
35,000 36,000 35 77 115 137 158
36,000 37,000 37 81 121 144 166
37,000 38,000 39 85 127 151 174
38,000 39,000 41 89 132 158 183
39,000 40,000 42 93 138 166 190
40,000 41,000 44 97 144 172 199
41,000 42,000 46 101 150 179 207
42,000 43,000 48 105 155 187 215
43,000 44,000 50 109 161 193 223
44,000 45,000 51 113 167 201 231
45,000 46,000 53 117 173 207 239
46,000 47,000 55 121 179 214 247
47,000 48,000 57 124 185 222 255
48,000 49,000 59 128 191 228 264
49,000 50,000 60 133 196 236 271
50,000 51,000 62 136 203 242 280
51,000 52,000 64 140 209 249 288
52,000 53,000 66 144 214 257 295
53,000 54,000 68 148 220 263 304
54,000 55,000 69 152 226 271 312
55,000 56,000 71 156 232 277 320
56,000 57,000 73 160 238 284 328
57,000 58,000 75 164 243 292 336
58,000 59,000 77 168 249 298 345
59,000 60,000 78 172 255 306 352
60,000 62,000 81 178 264 316 364
62,000 64,000 85 185 276 330 381
64,000 66,000 88 194 287 344 397
66,000 68,000 92 201 299 358 413
68,000 70,000 95 209 311 372 430
70,000 72,000 99 217 322 387 445
72,000 74,000 102 225 334 400 462
74,000 76,000 106 233 346 414 478
76,000 78,000 110 241 357 428 494
78,000 80,000 113 249 369 442 510

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80,000 85,000 120 262 390 467 538
85,000 90,000 128 282 419 502 579
90,000 95,000 137 302 448 537 620
95,000 100,000 146 322 477 572 660
100,000 110,000 160 351 521 625 721
110,000 120,000 178 390 580 695 801
120,000 130,000 196 430 638 765 882
130,000 140,000 214 469 697 835 963
140,000 150,000 232 508 755 906 1,044
150,000 160,000 249 548 814 975 1,126
160,000 170,000 267 588 872 1,045 1,207
170,000 180,000 285 627 930 1,116 1,288
180,000 190,000 303 666 989 1,186 1,368
190,000 200,000 321 706 1,047 1,256 1,449
200,000 210,000 339 745 1,106 1,326 1,530
210,000 220,000 357 784 1,165 1,396 1,611
220,000 230,000 375 824 1,223 1,466 1,692
230,000 240,000 393 863 1,281 1,537 1,773
240,000 and over 411 902 1,340 1,607 1,854

REV. PROC. 2016-23 TABLE 6

DOLLAR AMOUNTS FOR TRUCKS AND VANS
WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2016

Fair Market Value of
Truck or Van

Tax Year During Lease

Over

Not Over

1
st

2
nd

3
rd

4
th

5
th
& later

$19,500 $20,000 3 8 12 14 16
20,000 20,500 4 10 15 17 20
20,500 21,000 5 12 17 21 25
21,000 21,500 6 14 20 25 28
21,500 22,000 7 16 23 28 32
22,000 23,000 8 19 28 33 38
23,000 24,000 10 23 33 41 46
24,000 25,000 12 26 40 47 55
25,000 26,000 14 30 46 54 63
26,000 27,000 16 34 51 62 70
27,000 28,000 17 38 58 68 79
28,000 29,000 19 42 63 76 86
29,000 30,000 21 46 69 82 95
30,000 31,000 23 50 75 89 103
31,000 32,000 25 54 80 97 111
32,000 33,000 26 58 86 104 119
33,000 34,000 28 62 92 111 127
34,000 35,000 30 66 98 117 136

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35,000 36,000 32 70 104 124 143
36,000 37,000 34 73 110 132 151
37,000 38,000 35 78 115 139 160
38,000 39,000 37 82 121 146 167
39,000 40,000 39 85 128 152 176
40,000 41,000 41 89 133 160 184
41,000 42,000 42 94 139 166 192
42,000 43,000 44 97 145 174 200
43,000 44,000 46 101 151 181 208
44,000 45,000 48 105 157 187 217
45,000 46,000 50 109 162 195 224
46,000 47,000 51 113 169 201 233
47,000 48,000 53 117 174 209 240
48,000 49,000 55 121 180 216 248
49,000 50,000 57 125 186 222 257
50,000 51,000 59 129 191 230 265
51,000 52,000 60 133 197 237 273
52,000 53,000 62 137 203 244 281
53,000 54,000 64 141 209 250 290
54,000 55,000 66 144 216 257 298
55,000 56,000 68 148 221 265 305
56,000 57,000 69 153 226 272 314
57,000 58,000 71 156 233 279 321
58,000 59,000 73 160 239 285 330
59,000 60,000 75 164 244 293 338
60,000 62,000 77 170 253 304 350
62,000 64,000 81 178 265 317 366
64,000 66,000 85 186 276 331 383
66,000 68,000 88 194 288 345 399
68,000 70,000 92 202 299 360 414
70,000 72,000 95 210 311 374 431
72,000 74,000 99 217 324 387 447
74,000 76,000 102 226 335 401 463
76,000 78,000 106 233 347 415 480
78,000 80,000 110 241 358 430 495
80,000 85,000 116 255 379 454 524
85,000 90,000 125 274 409 489 564
90,000 95,000 134 294 437 525 605
95,000 100,000 143 314 466 560 645
100,000 110,000 156 344 510 612 706
110,000 120,000 174 383 569 682 787
120,000 130,000 192 422 628 752 868
130,000 140,000 210 462 685 823 949
140,000 150,000 228 501 744 893 1,030
150,000 160,000 246 540 803 963 1,111
160,000 170,000 264 580 861 1,033 1,192

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170,000 180,000 282 619 920 1,102 1,274
180,000 190,000 300 658 979 1,172 1,354
190,000 200,000 318 698 1,036 1,243 1,435
200,000 210,000 335 738 1,095 1,313 1,516
210,000 220,000 353 777 1,154 1,383 1,597
220,000 230,000 371 816 1,212 1,454 1,678
230,000 240,000 389 856 1,270 1,524 1,759
240,000 and over 407 895 1,329 1,594 1,839

.03 Revised Amounts for Passenger Automobiles Placed in Service During 2015.
(1) Calculation of the Revised Amount. The revised depreciation limits provided in
this section 4.03 were calculated by increasing the existing limitations on the first year
allowance in Rev. Proc. 2015-19 by $8,000 as provided in § 168(k)(2)(F)(i).
(2) Amount of the Revised Limitation. For passenger automobiles (that are not
trucks or vans) placed in service by the taxpayer in calendar year 2015 for which the
§ 168(k) additional first year depreciation deduction applies, Table 7 of this revenue
procedure contains the revised dollar amount of the depreciation limitations for each
taxable year. For trucks or vans placed in service by the taxpayer in calendar year
2015 for which the § 168(k) additional first year depreciation deduction applies, Table 8
of this revenue procedure contains the revised dollar amount of the depreciation
limitations for each taxable year. If the § 168(k) additional first year depreciation
deduction does not apply to a passenger automobile placed in service by the taxpayer
in calendar year 2015, the depreciation limitations for each taxable year in Tables 1 and
2 of Rev. Proc. 2015-19 apply.
REV. PROC. 2016-23 TABLE 7

DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES
(THAT ARE NOT TRUCKS OR VANS) PLACED IN SERVICE IN CALENDAR YEAR
2015 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION
DEDUCTION APPLIES

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Tax Year Amount
1st Tax Year $ 11,160
2nd Tax Year $ 5,100
3rd Tax Year $ 3,050
Each Succeeding Year $ 1,875

REV. PROC. 2016-23 TABLE 8

DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN SERVICE IN
CALENDAR YEAR 2015 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR
DEPRECIATION DEDUCTION APPLIES

Tax Year Amount
1st Tax Year $11,460
2nd Tax Year $ 5,600
3rd Tax Year $ 3,350
Each Succeeding Year $ 1,975

(3) Modification to lease inclusion amounts for 2015. The lease inclusion
amounts in Tables 3 and 4 of Rev. Proc. 2015-19 are modified by striking the first three
lines of inclusion amounts in Table 3 and the first two lines of inclusion amounts in
Table 4. Consequently, Table 3 of Rev. Proc. 2015-19 applies to passenger
automobiles (other than trucks and vans) that are first leased by the taxpayer in
calendar year 2015 with a fair market value over $19,000, and Table 4 of Rev. Proc.
2015-19 applies to trucks and vans that are first leased by the taxpayer in calendar year
2015 with a fair market value over $19,500.
SECTION 5. EFFECTIVE DATE
This revenue procedure, with the exception of section 4.03, applies to passenger
automobiles that a taxpayer first places in service or first leases during calendar year
2016. Section 4.03 of this revenue procedure applies to passenger automobiles that a
taxpayer first places in service or first leases during calendar year 2015.
SECTION 6. EFFECT ON OTHER DOCUMENTS
Rev. Proc. 2015-19 is amplified and modified.

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SECTION 7. DRAFTING INFORMATION
The principal author of this revenue procedure is Bernard P. Harvey of the Office
of Associate Chief Counsel (Income Tax & Accounting). For further information
regarding this revenue procedure, contact Mr. Harvey at (202) 317-7005 (not a toll-free
call).