The Internal Revenue Service and businesses have long contested the line that divides spending on repairs, which companies can deduct on that year's tax return, and spending on improvements, which must be capitalized and depreciated over time. The IRS has come out with a new set of "repair regulations" that make significant changes in how companies should treat such expenditures for tax purposes.

The changes pose a compliance challenge, with a KPMG survey of 1,900 corporate tax executives showing 42% expect the revised regulations will be harder to administer. In the long run, though, companies could benefit because the rules may make it easier for them to take losses on building components they have replaced.

One change involves how companies judge whether spending should be deducted or capitalized. In the past, the cost of the work was measured against the value of the entire building, but the new rules say to compare the cost against the building system involved. That means more expenditures are likely to be capitalized, rather than deducted, says Eric Lucas, a principal in KPMG's national tax practice in Washington.