Capital Expenditure

{
  "id": "MLC-T-ENV-004097",
  "term": "Capital Expenditure",
  "field": "Environment",
  "definition": "1. Expenditure for a physical or operational change to an existing facility which exceeds the product of the applicable “annual asset guideline repair allowance percentage” specified in the latest edition of Internal Revenue Service (IRS) Publication 534 and the existing facility's basis, as defined by section 1012 of the Internal Revenue Code. However, the total expenditure for a physical or operational change to an existing facility must not be reduced by any “excluded additions” as defined in IRS Publication 534, as would be done for tax purposes.\n\n2. In addition to the definition in 40 CFR 60.2, an expenditure for a physical or operational change to an existing facility that:(a) Exceeds P, the product of the facility's replacement cost, R, and an adjusted annual asset guideline repair allowance, A, as reflected by the following equation: P = R × A, where(1) The adjusted annual asset guideline repair allowance, A, is the product of the percent of the replacement cost, Y, and the applicable basic annual asset guideline repair allowance, B, divided by 100 as reflected by the following equation: A = Y × (B ÷ 100);(2) The percent Y is determined from the following equation: Y = 1.0 - 0.575 log X, where X is 1982 minus the year of construction; and(3) The applicable basic annual asset guideline repair allowance, B, is selected from the following table consistent with the applicable subpart:Table for Determining Applicable Value for B [40 CFR 60.481 (CFR 2013)]\n\n3. Expenditure for a physical or operational change to a stationary source which exceeds the product of the applicable “annual asset guideline repair allowance percentage” specified in the latest edition of Internal Revenue Service (IRS) Publication 534 and the stationary source's basis, as defined by section 1012 of the Internal Revenue Code. However, the total expenditure for a physical or operational change to a stationary source must not be reduced by any “excluded additions” as defined for stationary sources constructed after December 31, 1981, in IRS Publication 534, as would be done for tax purposes. In addition, “annual asset guideline repair allowance” may be used even though it is excluded for tax purposes in IRS Publication 534.\n\n4. In addition to the definition in 40 CFR 60.2, an expenditure for a physical or operational change to an existing facility that exceeds P, the product of the facility's replacement cost, R, and an adjusted annual asset guideline repair allowance, A, as reflected by the following equation: P = R × A, where(a) The adjusted annual asset guideline repair allowance, A, is the product of the percent of the replacement cost, Y, and the applicable basic annual asset guideline repair allowance, B, as reflected by the following equation: A = Y × (B ÷ 100);(b) The percent Y is determined from the following equation: Y = 1.0 - 0.57 log X, where X is 1986 minus the year of construction; and(c) The applicable basic annual asset guideline repair allowance, B, is equal to 12.5.\n\n5. In addition to the definition in 40 CFR 60.2, an expenditure for a physical or operational change to an existing facility that: (1) Exceeds P, the product of the facility's replacement cost, R, and an adjusted annual asset guideline repair allowance, A, as reflected by the following equation: P = R × A, where (i) The adjusted annual asset guideline repair allowance, A, is the product of the percent of the replacement cost, Y, and the applicable basic annual asset guideline repair allowance, B, divided by 100 as reflected by the following equation: A = Y × (B ÷ 100); (ii) The percent Y is determined from the following equation: Y = 1.0 - 0.575 log X, where X is 2011 minus the year of construction; and (iii) The applicable basic annual asset guideline repair allowance, B, is 4.5. (2)\n\n6. In addition to the definition in 40 CFR 60.2, an expenditure for a physical or operational change to an existing facility that: (1) Exceeds P, the product of the facility's replacement cost, R, and an adjusted annual asset guideline repair allowance, A, as reflected by the following equation: P = R × A, where (i) The adjusted annual asset guideline repair allowance, A, is the product of the percent of the replacement cost, Y, and the applicable basic annual asset guideline repair allowance, B, divided by 100 as reflected by the following equation A = Y × (B ÷ 100); (ii) The percent Y is determined from the following equation: Y = 1.0 - 0.575 log X, where X is 2011 minus the year of construction; and (iii) The applicable basic annual asset guideline repair allowance, B, is 4.5.\n\n7. In addition to the definition in 40 CFR 60.2, an expenditure for a physical or operational change to an existing facility that: (1) Exceeds P, the product of the facility's replacement cost, R, and an adjusted annual asset guideline repair allowance, A, as reflected by the following equation: P = R × A, where: (i) The adjusted annual asset guideline repair allowance, A, is the product of the percent of the replacement cost, Y, and the applicable basic annual asset guideline repair allowance, B, divided by 100 as reflected by the following equation: A = Y × (B ÷ 100); (ii) The percent Y is determined from the following equation: Y = (CPI of date of construction/most recently available CPI of date of project), where the “CPI-U, U.S. city average, all items” must be used for each CPI value; and (iii) The applicable basic annual asset guideline repair allowance, B, is 4.5.\n\n8. As an alternative to the definition in 40 CFR 60.2, an expenditure for a physical or operational change to an existing facility that: Exceeds P, the product of the facility's replacement cost, R, and an adjusted annual asset guideline repair allowance, A, as reflected by the following equation: P = R × A, where: (1)(i) The adjusted annual asset guideline repair allowance, A, is the product of the percent of the replacement cost, Y, and the applicable basic annual asset guideline repair allowance, B, divided by 100 as reflected by the following equation: A = Y × (B ÷ 100); (ii) The percent Y is determined from the following equation: Y = (CPI of date of construction/most recently available CPI of date of project), where the “CPI-U, U.S. city average, all items” must be used for each CPI value; and (iii) The applicable basic annual asset guideline repair allowance, B, is 4.5. (2) [Reserved]\n\n9. In addition to the definition in § 60.2, an expenditure for a physical or operational change to an existing facility that: (1) Exceeds P, the product of the facility's replacement cost, R, and an adjusted annual asset guideline repair allowance, A, as reflected by the following equation: P = R × A, where: (i) The adjusted annual asset guideline repair allowance, A, is the product of the percent of the replacement cost, Y, and the applicable basic annual asset guideline repair allowance, B, divided by 100 as reflected by the following equation: Equation 1 to Capital Expenditure Paragraph (1)(i) A = Y × (B ÷ 100); (ii) The percent Y is determined from the following equation: Y = 1.0 - 0.575 log X, where X is: (A) 2006 minus the year of construction if the physical or operational change to the existing facility was on or after November 16, 2007, or (B) 1982 minus the year of construction if the physical or operational change to the existing facility was prior to November 16, 2007; and (iii) The applicable basic annual asset guideline repair allowance, B, is selected from the following table consistent with the applicable subpart:",
  "references": [
    "40 CFR 60.2 (CFR 2013); 40 CFR 60.2 (CFR 2016)",
    "40 CFR 60.481a (CFR 2013)",
    "40 CFR 61.02 (CFR 2013)",
    "40 CFR 60.561 (CFR 2013)",
    "Definition truncated. For full definition, see 40 CFR 61.02 (CFR 2013)",
    "40 CFR 60.5430 (CFR 2016)",
    "85 FR 57398; 40 CFR 60.5430a (CFR 2021)",
    "40 CFR 60.5430b (CFR 2024)",
    "40 CFR 60.481a (CFR 2024)"
  ],
  "url": "https://mlchart.com/terminology/environment/capital-expenditure/"
}