Septic System install on a commerical property

[RESIPSA123]

A county gov't has forced my client to install a heftier septic system for her shopping mall.  The system cost $122,000 and was paid for in 2019.  Now... what to do with this?  Is it eligible for bonus depreciation?  How about Sec 179?  Does it have to be depreciated?  I've seen IRS rev procs saying that a septic system has an indeterminable life and thus not depreciable... I've also see people argue that it should be depreciated for 39 years.... So confused... Can't tell how the new rules affect this...

[Terry53029]

It is a much talked about topic, but I would depreciate over 39 years. Ironman convinced me a few years ago. Maybe he will weigh in.  

[Camp1040]

I wrestled with that question a few years ago also. I took the position of a land improvement and depreciated it over 15 years. 

[Just-Lisa-Now-]

That was my thought too, its in the ground its land improvement...but I do remember a longer conversation about it at one point.

[RESIPSA123]

Assuming I "man up" and take the bonus depreciation (do 15 yrs MACRS) ... Can I take sec. 179 in CALIF and get 25K, assuming adequate income, etc... or is this a capital improvement and therefor no? 

[Camp1040]

I just look up the 2012 tax return I did and I took 39 years for the commercial bldg septic system and not 15.

I must have changed my position after some research and community discussion. That return had a bathroom install also, which was 39 yrs.

I'm now voting 39yrs!..............

[RESIPSA123]

Wow... This is like vaccinate v. don't vaccinate your child... haha... Thanks everyone... Now if I can just figure out the section 179 issue for CALIF... I don't think it's allowed, this sewer/septic system... any thoughts?  Seems to me this is a capital improvement whether I go 15 years or not.

[Camp1040]

I did get the flu shot!

[itonewbie]

@RESIPSA123Where did you see the Rev. Proc.?  Would be great if you could share the citations for reference (I mean that in a respectful way).

I am with @Terry53029 and @IRonMaN that septic system has a class life of 39 years on the basis it is a necessary structural component relating to the operation or maintenance of a building as defined under §1.48-1(e).  In fact, that has consistently been the IRS position.  Caselaw also supports that and considers whether the asset in question is (1) accessory to a business, (2) permanent, or (3) "ornamentation", taking into account the type of building of which the asset is a part.  It should not, therefore, be treated as a land improvement.