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Internal Revenue Bulletin:  2006-12 

March 20, 2006 

Rev. Proc. 2006-18


SECTION 1. PURPOSE

01. This revenue procedure provides: (1) limitations on depreciation deductions for owners of passenger automobiles first placed in service by the taxpayer during calendar year 2006, including special tables of limitations on depreciation deductions for trucks and vans, and for passenger automobiles designed to be propelled primarily by electricity and built by an original equipment manufacturer (electric automobiles); and (2) the amounts to be included in income by lessees of passenger automobiles first leased by the taxpayer during calendar year 2006, including a separate table of inclusion amounts for lessees of trucks and vans, and a separate table for lessees of electric automobiles.

02. The tables detailing these depreciation limitations and lessee inclusion amounts reflect the automobile price inflation adjustments required by § 280F(d)(7).

SECTION 2. BACKGROUND

01. For owners of passenger automobiles, § 280F(a) imposes dollar limitations on the depreciation deduction for the year that the passenger automobile is placed in service by the taxpayer and each succeeding year. In the case of electric automobiles placed in service after August 5, 1997, and before January 1, 2007, § 280F(a)(1)(C) requires tripling of these limitation amounts. Section 280F(d)(7) requires the amounts allowable as depreciation deductions to be increased by a price inflation adjustment amount for passenger automobiles placed in service after 1988. 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 that trucks and vans have been subject to since 1988. For purposes of this revenue procedure, the term “trucks and vans” refers to passenger automobiles that are built on a truck chassis, including minivans and sport utility vehicles (SUVs) that are built on a truck chassis.

02. For leased passenger automobiles, § 280F(c) requires a reduction in the deduction allowed to the lessee of the passenger automobile. The reduction must be substantially equivalent to the limitations on the depreciation deductions imposed on owners of passenger automobiles. Under § 1.280F-7(a), this reduction requires the lessees to include in gross income an inclusion amount determined by applying a formula to the amount obtained from a table. There is a table for lessees of electric automobiles, a table for lessees of trucks and vans, and a table for all other passenger automobiles. Each table shows inclusion amounts for a range of fair market values for each tax year after the passenger automobile is first leased.

SECTION 3. SCOPE

01. The limitations on depreciation deductions in section 4.02(2) of this revenue procedure apply to passenger automobiles (other than leased passenger automobiles) that are placed in service by the taxpayer in calendar year 2006, and continue to apply for each tax year that the passenger automobile remains in service.

02. The tables in section 4.03 of this revenue procedure apply to leased passenger automobiles for which the lease term begins during calendar year 2006. Lessees of such passenger automobiles must use these tables to determine the inclusion amount for each tax year during which the passenger automobile is leased. See Rev. Proc. 2002-14, 2002-1 C.B. 450, for passenger automobiles first leased before January 1, 2003, Rev. Proc. 2003-75, 2003-2 C.B. 1018, for passenger automobiles first leased during calendar year 2003, Rev. Proc. 2004-20, 2004-1 C.B. 642, for passenger automobiles first leased during calendar year 2004, and Rev. Proc. 2005-13, 2005-1 C.B. 759, for passenger automobiles first leased during calendar year 2005.

SECTION 4. APPLICATION

01. In General.

(1) Limitations on Depreciation Deductions for Certain Automobiles. The limitations on depreciation deductions for passenger automobiles placed in service by the taxpayer for the first time during calendar year 2006 are found in Tables 1 through 3 in section 4.02(2) of this revenue procedure. Table 1 of this revenue procedure provides limitations on depreciation deductions for a passenger automobile. Table 2 of this revenue procedure provides limitations on depreciation deductions for a truck or van. Table 3 of this revenue procedure provides limitations on depreciation deductions for an electric automobile.

(2) Inclusions in Income of Lessees of Passenger Automobiles. A taxpayer first leasing a passenger automobile during calendar year 2006 must determine the inclusion amount that is added to gross income using the tables in section 4.03 of this revenue procedure. The inclusion amount is determined using Table 4 in the case of a passenger automobile (other than a truck, van, or electric automobile), Table 5 in the case of a truck or van, and Table 6 in the case of an electric automobile. In addition, the procedures of § 1.280F-7(a) must be followed.

02. Limitations on Depreciation Deductions for Certain Automobiles.

(1) Amount of the Inflation Adjustment. 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. The term “CPI automobile component” is defined in § 280F(d)(7)(B)(ii) as the “automobile component” of the Consumer Price Index for all Urban Consumers published by the Department of Labor (the CPI). The new car component of the CPI was 115.2 for October 1987 and 135.1 for October 2005. The October 2005 index exceeded the October 1987 index by 19.9. The Service has, therefore, determined that the automobile price inflation adjustment for 2006 for passenger automobiles (other than trucks and vans) is 17.27 percent (19.9/115.2 x 100%). This adjustment is applicable to all passenger automobiles (other than trucks and vans) that are first placed in service in calendar year 2006. The dollar limitations in § 280F(a) must therefore be multiplied by a factor of 0.1727, 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, vans, and electric automobiles) for calendar year 2006. To determine the dollar limitations applicable to an electric automobile first placed in service during calendar year 2006, the dollar limitations in § 280F(a) are tripled in accordance with § 280F(a)(1)(C) and are then multiplied by a factor of 0.1727; the resulting increases, after rounding to the nearest $100, are added to the tripled 1988 limitations to give the depreciation limitations for calendar year 2006. To determine the dollar limitations applicable to trucks and vans first placed in service during calendar year 2006, the new truck component of the CPI is used instead of the new car component. The new truck component of the CPI was 112.4 for October 1987 and 143.6 for October 2005. The October 2005 index exceeded the October 1987 index by 31.2. The Service has, therefore, determined that the automobile price inflation adjustment for 2006 for trucks and vans is 27.76 percent (31.2/112.4 x 100%). This adjustment is applicable to all trucks and vans that are first placed in service in calendar year 2006. The dollar limitations in § 280F(a) must therefore be multiplied by a factor of 0.2776, and the resulting increases, after rounding to the nearest $100, are added to the 1988 limitations to give the depreciation limitations applicable to trucks and vans.

(2) Amount of the Limitation. For passenger automobiles placed in service by the taxpayer in calendar year 2006, Tables 1 through 3 contain the dollar amount of the depreciation limitation for each tax year. Use Table 1 for passenger automobiles placed in service by the taxpayer in calendar year 2006. Use Table 2 for trucks and vans placed in service by the taxpayer in calendar year 2006. Use Table 3 for electric automobiles placed in service by the taxpayer in calendar year 2006.

REV. PROC. 2006-18 TABLE 1
DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES PLACED IN SERVICE BY THE TAXPAYER DURING CALENDAR YEAR 2006
Tax Year Amount
1st Tax Year $2,960
2nd Tax Year $4,800
3rd Tax Year $2,850
Each Succeeding Year $1,775
REV. PROC. 2006-18 TABLE 2
DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN SERVICE BY THE TAXPAYER DURING CALENDAR YEAR 2006
Tax Year Amount
1st Tax Year $3,260
2nd Tax Year $5,200
3rd Tax Year $3,150
Each Succeeding Year $1,875
REV. PROC. 2006-18 TABLE 3
DEPRECIATION LIMITATIONS FOR ELECTRIC AUTOMOBILES PLACED IN SERVICE BY THE TAXPAYER DURING CALENDAR YEAR 2006
Tax Year Amount
1st Tax Year $8,980
2nd Tax Year $14,400
3rd Tax Year $8,650
Each Succeeding Year $5,225

03. Inclusions in Income of Lessees of Passenger Automobiles.

The inclusion amounts for passenger automobiles first leased in calendar year 2006 are calculated under the procedures described in § 1.280F-7(a). Lessees of passenger automobiles other than trucks, vans, and electric automobiles should use Table 4 of this revenue procedure in applying these procedures, while lessees of trucks and vans should use Table 5 of this revenue procedure and lessees of electric automobiles should use Table 6 of this revenue procedure.

REV. PROC. 2006-18 TABLE 4
DOLLAR AMOUNTS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS, VANS, OR ELECTRIC AUTOMOBILES) WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2006
Fair Market Value of Passenger Automobile Tax Year During Lease
Over Not Over 1st 2nd 3rd 4th 5th & later
$15,200 $15,500 4 6 10 10 10
15,500 15,800 6 10 16 18 18
15,800 16,100 8 15 22 25 28
16,100 16,400 9 19 29 33 36
16,400 16,700 11 24 35 40 45
16,700 17,000 13 28 42 48 53
17,000 17,500 16 34 50 58 66
17,500 18,000 19 41 61 71 80
18,000 18,500 23 48 71 84 95
18,500 19,000 26 55 82 96 110
19,000 19,500 29 62 93 109 125
19,500 20,000 32 70 103 122 139
20,000 20,500 36 76 114 135 154
20,500 21,000 39 84 124 148 168
21,000 21,500 42 91 135 160 184
21,500 22,000 45 98 146 173 198
22,000 23,000 50 109 162 192 220
23,000 24,000 57 123 183 218 250
24,000 25,000 63 138 204 243 279
25,000 26,000 70 152 225 269 309
26,000 27,000 76 166 247 294 339
27,000 28,000 83 181 268 319 368
28,000 29,000 90 195 289 345 397
29,000 30,000 96 209 311 371 426
30,000 31,000 103 223 332 397 455
31,000 32,000 109 238 353 422 485
32,000 33,000 116 252 374 448 515
33,000 34,000 122 267 395 473 545
34,000 35,000 129 281 417 498 574
35,000 36,000 135 295 439 523 604
36,000 37,000 142 309 460 549 633
37,000 38,000 148 324 481 575 662
38,000 39,000 155 338 502 601 691
39,000 40,000 161 353 523 626 721
40,000 41,000 168 367 545 651 750
41,000 42,000 175 381 566 677 780
42,000 43,000 181 396 587 702 810
43,000 44,000 188 410 608 728 839
44,000 45,000 194 424 630 753 869
45,000 46,000 201 438 651 779 898
46,000 47,000 207 453 672 805 927
47,000 48,000 214 467 694 830 956
48,000 49,000 220 482 715 855 986
49,000 50,000 227 496 736 881 1,016
50,000 51,000 233 510 758 906 1,045
51,000 52,000 240 525 778 932 1,075
52,000 53,000 246 539 800 958 1,104
53,000 54,000 253 553 821 984 1,133
54,000 55,000 259 568 842 1,009 1,163
55,000 56,000 266 582 864 1,034 1,192
56,000 57,000 273 596 885 1,060 1,221
57,000 58,000 279 611 906 1,085 1,251
58,000 59,000 286 625 927 1,111 1,281
59,000 60,000 292 639 949 1,136 1,311
60,000 62,000 302 661 981 1,174 1,354
62,000 64,000 315 690 1,023 1,225 1,413
64,000 66,000 328 718 1,066 1,276 1,473
66,000 68,000 341 747 1,108 1,328 1,531
68,000 70,000 354 776 1,151 1,378 1,590
70,000 72,000 367 804 1,194 1,429 1,649
72,000 74,000 380 833 1,236 1,481 1,707
74,000 76,000 393 862 1,278 1,532 1,767
76,000 78,000 407 890 1,321 1,583 1,825
78,000 80,000 420 919 1,363 1,634 1,884
80,000 85,000 443 969 1,438 1,723 1,987
85,000 90,000 475 1,041 1,544 1,851 2,135
90,000 95,000 508 1,112 1,651 1,978 2,282
95,000 100,000 541 1,184 1,757 2,106 2,429
100,000 110,000 590 1,291 1,917 2,297 2,650
110,000 120,000 655 1,435 2,130 2,552 2,944
120,000 130,000 720 1,579 2,342 2,807 3,239
130,000 140,000 786 1,722 2,555 3,062 3,534
140,000 150,000 851 1,865 2,768 3,317 3,829
150,000 160,000 916 2,009 2,980 3,573 4,123
160,000 170,000 982 2,152 3,193 3,828 4,417
170,000 180,000 1,047 2,295 3,406 4,083 4,712
180,000 190,000 1,112 2,439 3,619 4,337 5,007
190,000 200,000 1,178 2,582 3,832 4,592 5,301
200,000 210,000 1,243 2,726 4,044 4,848 5,595
210,000 220,000 1,309 2,869 4,257 5,103 5,890
220,000 230,000 1,374 3,012 4,470 5,358 6,185
230,000 240,000 1,439 3,156 4,682 5,613 6,480
240,000 and up 1,505 3,299 4,895 5,868 6,774
REV. PROC. 2006-18 TABLE 5
DOLLAR AMOUNTS FOR TRUCKS AND VANS WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2006
Fair Market Value of Truck or Van Tax Year During Lease
Over Not Over 1st 2nd 3rd 4th 5th and later
$16,700 $17,000 4 8 12 14 16
17,000 17,500 6 14 20 24 29
17,500 18,000 9 21 31 37 43
18,000 18,500 13 28 42 49 58
18,500 19,000 16 36 52 62 72
19,000 19,500 19 43 63 75 87
19,500 20,000 23 50 73 88 102
20,000 20,500 26 57 84 101 116
20,500 21,000 29 64 95 113 131
21,000 21,500 32 72 105 126 146
21,500 22,000 36 78 116 139 161
22,000 23,000 41 89 132 158 183
23,000 24,000 47 104 153 183 213
24,000 25,000 54 118 174 209 242
25,000 26,000 60 132 196 235 271
26,000 27,000 67 146 217 261 300
27,000 28,000 73 161 238 286 330
28,000 29,000 80 175 260 311 359
29,000 30,000 86 190 281 336 389
30,000 31,000 93 204 302 362 418
31,000 32,000 99 219 323 388 447
32,000 33,000 106 233 344 413 478
33,000 34,000 112 247 366 439 506
34,000 35,000 119 261 387 465 536
35,000 36,000 125 276 408 490 566
36,000 37,000 132 290 430 515 595
37,000 38,000 139 304 451 541 624
38,000 39,000 145 319 472 566 654
39,000 40,000 152 333 493 592 684
40,000 41,000 158 347 515 618 712
41,000 42,000 165 362 536 642 743
42,000 43,000 171 376 557 669 772
43,000 44,000 178 390 579 694 801
44,000 45,000 184 405 600 719 831
45,000 46,000 191 419 621 745 860
46,000 47,000 197 434 642 770 890
47,000 48,000 204 448 663 796 919
48,000 49,000 210 462 685 822 948
49,000 50,000 217 476 707 847 977
50,000 51,000 224 490 728 872 1,008
51,000 52,000 230 505 749 898 1,037
52,000 53,000 237 519 770 924 1,066
53,000 54,000 243 534 791 949 1,096
54,000 55,000 250 548 813 974 1,125
55,000 56,000 256 563 833 1,000 1,155
56,000 57,000 263 577 855 1,025 1,184
57,000 58,000 269 591 877 1,051 1,213
58,000 59,000 276 605 898 1,077 1,243
59,000 60,000 282 620 919 1,102 1,272
60,000 62,000 292 641 951 1,141 1,316
62,000 64,000 305 670 994 1,191 1,375
64,000 66,000 318 699 1,036 1,242 1,435
66,000 68,000 331 728 1,078 1,293 1,494
68,000 70,000 344 756 1,121 1,345 1,552
70,000 72,000 358 784 1,164 1,395 1,612
72,000 74,000 371 813 1,206 1,447 1,670
74,000 76,000 384 842 1,249 1,497 1,729
76,000 78,000 397 871 1,291 1,548 1,788
78,000 80,000 410 899 1,334 1,600 1,846
80,000 85,000 433 949 1,409 1,688 1,950
85,000 90,000 465 1,021 1,515 1,816 2,098
90,000 95,000 498 1,093 1,621 1,944 2,244
95,000 100,000 531 1,164 1,728 2,071 2,392
100,000 110,000 580 1,272 1,887 2,263 2,612
110,000 120,000 645 1,416 2,099 2,518 2,907
120,000 130,000 711 1,559 2,312 2,773 3,202
130,000 140,000 776 1,702 2,525 3,028 3,497
140,000 150,000 841 1,846 2,738 3,283 3,791
150,000 160,000 907 1,989 2,950 3,539 4,085
160,000 170,000 972 2,132 3,164 3,793 4,380
170,000 180,000 1,037 2,276 3,376 4,049 4,674
180,000 190,000 1,103 2,419 3,589 4,303 4,969
190,000 200,000 1,168 2,563 3,801 4,559 5,263
200,000 210,000 1,233 2,706 4,015 4,813 5,558
210,000 220,000 1,299 2,849 4,227 5,069 5,853
220,000 230,000 1,364 2,993 4,440 5,324 6,147
230,000 240,000 1,430 3,136 4,652 5,580 6,441
240,000 and up 1,495 3,279 4,866 5,834 6,736
REV. PROC. 2006-18 TABLE 6
DOLLAR AMOUNTS FOR ELECTRIC AUTOMOBILES WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2006
Fair Market Value of Electric Automobile Tax Year During Lease
Over Not Over 1st 2nd 3rd 4th 5th and later
$45,000 $46,000 4 8 11 12 12
46,000 47,000 10 22 33 37 42
47,000 48,000 17 36 54 63 72
48,000 49,000 24 51 74 89 101
49,000 50,000 30 65 96 114 131
50,000 51,000 37 79 118 139 160
51,000 52,000 43 94 139 165 189
52,000 53,000 50 108 160 190 219
53,000 54,000 56 123 181 216 248
54,000 55,000 63 137 202 242 277
55,000 56,000 69 151 224 267 307
56,000 57,000 76 165 245 293 337
57,000 58,000 82 180 266 318 367
58,000 59,000 89 194 288 343 396
59,000 60,000 95 209 309 369 425
60,000 62,000 105 230 341 407 470
62,000 64,000 118 259 383 459 528
64,000 66,000 131 288 425 510 587
66,000 68,000 144 316 469 560 646
68,000 70,000 158 345 510 612 705
70,000 72,000 171 373 554 662 764
72,000 74,000 184 402 596 713 823
74,000 76,000 197 431 638 765 881
76,000 78,000 210 459 682 815 940
78,000 80,000 223 488 724 866 1,000
80,000 85,000 246 538 798 956 1,103
85,000 90,000 278 610 905 1,083 1,250
90,000 95,000 311 682 1,011 1,211 1,397
95,000 100,000 344 753 1,118 1,338 1,544
100,000 110,000 393 861 1,277 1,529 1,766
110,000 120,000 458 1,004 1,490 1,785 2,060
120,000 130,000 524 1,147 1,703 2,040 2,354
130,000 140,000 589 1,291 1,915 2,295 2,649
140,000 150,000 654 1,435 2,127 2,551 2,943
150,000 160,000 720 1,578 2,340 2,806 3,237
160,000 170,000 785 1,721 2,553 3,061 3,532
170,000 180,000 850 1,865 2,766 3,315 3,827
180,000 190,000 916 2,008 2,979 3,570 4,122
190,000 200,000 981 2,151 3,192 3,826 4,416
200,000 210,000 1,046 2,295 3,404 4,081 4,711
210,000 220,000 1,112 2,438 3,617 4,336 5,005
220,000 230,000 1,177 2,581 3,830 4,591 5,300
230,000 240,000 1,243 2,725 4,042 4,846 5,594
240,000 and up 1,308 2,868 4,255 5,102 5,888

SECTION 5. EFFECTIVE DATE

This revenue procedure applies to passenger automobiles (other than leased passenger automobiles) that are first placed in service by the taxpayer during calendar year 2006, and to leased passenger automobiles that are first leased by the taxpayer during calendar year 2006.

SECTION 6. DRAFTING INFORMATION

The principal author of this revenue procedure is Bernard P. Harvey of the Office of Associate Chief Counsel (Passthroughs & Special Industries). For further information regarding the depreciation limitations and lessee inclusion amounts in this revenue procedure, contact Bernard P. Harvey at (202) 622-3110 (not a toll-free call).


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