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> June 9, 2008

The Honorable Eric Solomon

Assistant Secretary for Tax Policy

Department of the Treasury

P.O. Box 7604

Ben Franklin Station

Washington, DC 20044

**RE: REG‑168745‑03**

Dear Mr. Solomon:

On behalf of the Textile Rental Services Association of America (TRSA),
thank you for the opportunity to comment on the updated Notice of\
Proposed Rulemaking (NPRM) for Guidance Regarding Deduction and
Capitalization of Expenditures Related to Tangible Property (Guidance,
REG‑168745‑03). TRSA and its member companies have been following
developments on this NPRM very closely and we applaud the Internal
Revenue Service (IRS) for the improvements made between the rule as
originally proposed in the August 21, 2006, *Federal Register* and as it
was re-proposed in the March 10, 2008, *Federal Register*.

By withdrawing the original proposed Guidance and replacing it with the
NPRM of March 10, the IRS has shown that it considered the comments on
the August 2006 proposal seriously and is trying to ensure that the
Guidance is practical and understandable prior to finalization. This is
especially appreciated since this rulemaking began prior to the issuance
of E.O. 13422, which gives direction for Good Guidance Practices.

Founded in 1912, TRSA is the world's largest textile service industry
association, representing more than 1,000 linen supply companies, and
commercial and industrial laundry facilities in 24 countries. The
membership of TRSA represents a cross-section of the industry, including
some of the world's largest textile service companies, along with
numerous mid-size and one-plant operations. Our membership includes
companies currently doing business in commercial laundering and rental
services to commercial, industrial and institutional accounts, as well
as firms selling services, equipment and supplies to commercial
launderers and linen rental companies.

The Honorable Eric Solomon

June 9, 2008

Page 2

RE: REG-168745-03

TRSA member operating companies rent and clean fine linen, uniforms and
other textile products for the hospitality industry, healthcare
facilities, industrial plants and operations concerned with dust
control, while our associate members supply equipment and materials for
our industry's processes.

TRSA's mission is to advance the professionalism of its members and
promote their success through government advocacy, education, marketing
and business enhancing services. TRSA is committed to addressing the
changing needs of the industry, and our members, while striving to
surpass industry standards by uniting members through a progressive
organization.

**[Interest of TRSA and Its Member Companies]{.underline}**

By far, the bulk of TRSA members are family-owned enterprises. Clarity
of the tax code and ease of complying with it are, therefore, of
paramount importance to these firms.

Median member annual sales for TRSA member companies are \$11.8 million.
Thus, the majority qualify as a small business, which the Small Business
Administration defines for our industry as having annual receipts of
less than \$13 million. Altogether, our industry contributes
\$13 billion to U.S. GDP.

While most TRSA members are small businesses, the industry processes
more than six billion pounds of laundry per year. This translates to
hundreds of thousands of items passing through TRSA member facilities
every day. Moreover, many of the products that our members rent and
launder or otherwise handle are low-cost items. Examples include:

[Table Cloth]{.underline}

Purchase Cost: \$2.50 - \$5.00

Rental Price: 54 -- 60 cents

[Napkin]{.underline}

Purchase Cost: 75 cents - \$2.00

Rental Price: 7 -- 10 cents

[Wash Cloth]{.underline}

Purchase Cost: 18 cents -- 40 cents

Rental Price: 6 -- 9 cents

[Uniform]{.underline}

Purchase Cost: \$30.00 -- \$50.00

Rental Price: \$1.00 - \$2.00

The Honorable Eric Solomon

June 9, 2008

Page 3

RE: REG-168745-03

> [Walk-Off Mat (3 feet X 5 feet)]{.underline}

Purchase Cost: \$25.00 - \$35.00

Rental Price: \$3.00 - \$4.00

Certain high-end items such as those used by luxury hotels and resorts
often exceed \$100.

**[TRSA Supports UTSA Recommendations]{.underline}**

TRSA has had the opportunity to review the comments submitted by the
Uniform & Textile Service Association (UTSA). We strongly support the
UTSA recommendations and urge the IRS to follow these recommendations
when writing the final rule. Our comments, therefore, closely track
those of UTSA.

**[Proposed *De Minimis* Rule]{.underline}**

TRSA especially appreciates the acceptance by the IRS of the need for a
*de minimis* rule in the March 10 proposed Guidance. As the discussion
on the operations of the textile rental industry demonstrates, nearly
all of our rental items have a value of less than \$100. Without a *de
minimis* rule, the costs of tracking these goods for tax purposes would
far outweigh the benefit of proper accounting for both TRSA member
companies and IRS examiners.

-   **[The *De Minimis* Rule Should Be Set at \$500.]{.underline}** In
    discussions with the IRS following publication of the original NPRM
    for the Guidance, TRSA suggested a *de minimis* ceiling of \$500. We
    continue to maintain that this is a more appropriate beginning
    level. While nearly all of the goods that our operating members rent
    are beneath the \$100 *de minimis* level proposed in the March 10
    NPRM, every year they and our associate members put into service
    many products valued between \$100 and \$500. Consider, for example,
    an office chair, a laundry cart, high-end linens for luxury hotels
    and facilities, and barrier-gowns used in operating rooms. While
    some goods may be priced above \$500, the reason for establishing a
    *de minimis* value for detailed recordkeeping remains: the cost for
    paperwork below this amount will outweigh the benefit both to the
    taxpayer and to the IRS. TRSA encourages the IRS to consider the
    benefits of an increased threshold in helping to meet its
    obligations under the Paperwork Reduction Act of 1995
    (44 U.S.C. 3501 *et seq.*) to minimize the paperwork burden for
    small businesses, among other covered individuals and entities.

-   **[An Inflation Adjustment Is Needed]{.underline}.** As many
    sections of the tax code that contain an inflation-adjustment
    provision attest, there is value both to the IRS and to taxpayers
    for including language that would allow the *de minimis* level to
    track the Consumer Price

The Honorable Eric Solomon

June 9, 2008

Page 4

RE: REG-168745-03

> Index or other inflation indicator. The IRS does not need to go
> through a periodic rulemaking to keep the value useful, and the
> taxpayer is not made worse off through price increases. The current
> legislative attempts to "fix" the Alternative Minimum Tax so that it
> does not unnecessarily ensnare individuals for whom it was not
> intended, for example, would not be necessary if the original law had
> allowed for an inflation adjustment. In this instance, if the IRS does
> not include inflation-adjustment language pertaining to the *de
> minimis* level, it will either have to periodically undergo a
> rulemaking or accept the fact that the rule will not meet its intended
> purpose.

TRSA endorses the proposed language contained in the UTSA submission for
incorporating an inflation adjustment for the *de minimis* value in the
Guidance. For convenience, the UTSA suggested provision, which would be
inserted at the end of paragraph (d)(1), reads:

> "Proposed Language:
>
> 'Unit of property cost inflation adjustment. In the case of any unit
> of property placed in service after 2008 to which
> paragraph (d)(1)(iii) of this section applies, the dollar amount in
> paragraph (d)(1)(iii) of this section shall be increased by the
> inflation adjustment for each calendar year. Any increase under the
> preceding sentence shall be rounded to the nearest multiple of \$1.00.
> Such inflation adjustment for any calendar year is the percentage (if
> any) by which the CPI for the preceding calendar year exceeds the CPI
> for calendar year 2008. For purposes of this section, the term 'CPI'
> means the Consumer Price Index for All Urban Consumers published by
> the Department of Labor.'"

TRSA salutes the IRS for recognizing the need for a *de minimis* level
for the Guidance so that the recordkeeping burden does not overtake the
benefit of expensing. It is in this spirit that we strongly urge the IRS
to consider raising the threshold to \$500. Doing so would also assist
the IRS in meeting the goals of the Paperwork Reduction Act. Whether the
IRS agrees that the *de minimis* level should be increased, however, it
needs to include an inflation adjustment so that the benefits of its
good work so far do not wither away in the very near future.

**[Clarification of §1.263(a)-2(c)(2)]{.underline}**

Under the March 10 NPRM, confusion may arise pertaining to the
applicability of §1.263(a)-2(c)(2) and §1.162‑3. TRSA supports the
suggestion and reasoning in the UTSA submission that the final rule be
modified to include language such as:

"Materials and Supplies. This section is not applicable to items that
are properly classified as materials and supplies under §1.162‑3, except
as provided in §1.162‑3."

The Honorable Eric Solomon

June 9, 2008

Page 5

RE: REG-168745-03

Absent this change, TRSA is concerned that this section may not apply to
items properly classified under the proposed Guidance. It is, therefore,
incumbent on the IRS to clarify this provision to avoid inconsistent
enforcement and taxpayer confusion.

**[Modification of *De Minimis* Safe Harbor]{.underline}**

TRSA believes that the *de minimis* safe harbor will not be as helpful
as it could be if the NPRM is finalized with the "distortion of income"
provision as proposed. Specifically, this language requires the taxpayer
to take the value of "materials and supplies" costing \$100 or less

that are expensed and add it to the amount the taxpayer deducts in the
taxable year as materials and supplies to determine if it is less than
or equal to

> "(A) .1 percent of the taxpayer's gross receipts for the tax year or
> (B) 2 percent of the taxpayer's total depreciation and amortization
> for the taxable year as determined in its applicable financial
> statement."

TRSA joins UTSA in advocating that §1.263(a)-2(d)(4)(iii) of the
March 10 proposed Guidance be changed so that the taxpayer does not have
to add the two amounts. As described above, our industry processes
hundreds of thousands of items every day, and more than 6 billion pounds
per year. Keeping track of these items to comply with this provision
would penalize companies that by necessity must keep on hand all of
these low-cost goods. Retention of this provision as it appears in the
March 10 NPRM will undercut the value and intent of the IRS in creating
the safe harbor.

**[Conclusion]{.underline}**

TRSA greatly appreciates the attentiveness of the IRS in reviewing the
comments, submissions and presentations of those concerned about
specific provisions in the August 2006 NPRM. We especially congratulate
the IRS for incorporating modifications in order to make the Guidance
more useful, such as establishing a *de minimis* threshold. TRSA hopes,
however, that the IRS will bear in mind the many small businesses such
as those in our association that keep in stock, and supply and process,
billions of low-value items per year. To be most helpful, and to
minimize the potential paperwork burden, the final rule should:

-   Set the *de minimis* threshold at \$500.

-   Include an inflation adjustment for the *de minimis* safe harbor.

-   Clarify the applicability of the definition of "materials and
    supply."

-   Eliminate the requirement that the allowed deductions under the *de
    minimis* safe harbor be added to the total amount of "materials and
    supplies" that are deducted in a tax year.

The Honorable Eric Solomon

June 9, 2008

Page 6

RE: REG-168745-03

TRSA looks forward to the next phase of this rulemaking and is hopeful
that our and UTSA's suggestions for improvement are positively
considered. Thank you, again, for this opportunity.\
Please let me know if you have any questions or need additional
information.

> Sincerely,

![](media/image2.jpeg){width="2.2472222222222222in" height="0.7625in"}

> Roger F. Cocivera
>
> President & CEO
>
> Textile Rental Services Association of America