As a result of enacting the Technical and Miscellaneous Revenue Act of 1988, Congress took control of establishing and changing asset depreciation periods from the Treasury Department. A detailed example of changing an asset's recovery period by the legislative process is presented, as well as a detailed example of resolving an asset class dispute by congressional action. The paper establishes that the current system for determining asset depreciation recovery periods and the current asset recovery periods now in use are dysfunctional.
The authors argue that asset depreciation recovery periods should be determined based on a thoughtful and rational economic analysis (in accordance with the Tax Reform Act of 1986 Committee Reports), rather than be subject to the legislative process and become just another political issue subject to special interest lobbying efforts and the vagary of the revenue needs of government. The paper concludes with a recommendation to reassign the establishment and changes to asset recovery periods to the Treasury Department, where the resources and expertise reside, subject to congressional approval of the Treasury's recommendations.
