7 AAC 53.945 - Depreciation and use allowance costs

(a) A grantee shall calculate depreciation costs of an asset starting with the date of the acquisition of the asset by the grantee, or by a related organization or related party, as appropriate.

(b) A grantee shall calculate reimbursable depreciation and use allowance costs on a monthly basis. The department will reimburse a grantee only for that part of the allowable monthly depreciation cost of an asset that is proportionately equal to the grantee's equity in the asset on the last day of a calendar month. For the purposes of this section, "the grantee's equity in an asset" means the amount by which the basis of an asset, plus the basis of any capitalized improvements to the asset less accumulated depreciation of the asset and improvements to the asset, exceeds the total unpaid principal amount of any loans that were used to purchase the asset and make capitalized improvements, together with any loans for which the asset or improvements were used as collateral.

(c) For each month, a grantee shall calculate any depreciation cost for the grantee's equity in the asset using the straight-line method. In calculating depreciation, the grantee shall select an estimated useful life from those listed in this subsection. The grantee shall select the estimated useful life that corresponds most closely to the apparent actual useful life of the asset. Once a grantee has assigned a useful life to an asset, the grantee may not change the useful life in future grants.

(1) The permissible useful lives of equipment are

(A) three years;

(B) five years;

(C) 12 years; or

(D) 25 years.

(2) The permissible useful lives of vehicles are

(A) three years;

(B) five years; or

(C) 12 years.

(3) The permissible useful lives of buildings are

(A) 15 years;

(B) 20 years;

(C) 35 years; or

(D) 45 years.

(4) The permissible useful lives of improvements, mobile homes, or modular buildings for which the Alaska division of motor vehicles has issued a title are:

(A) eight years;

(B) 10 years;

(C) 15 years; or

(D) 25 years.

(d) For each month, a grantee shall calculate the use cost of an asset by

(1) subtracting an amount from the basis of the asset that is equal to the sum of the principal amounts, on the last day of the month, of all loans that were used to purchase the asset or for which the asset is pledged as collateral;

(2) multiplying the remainder times six and two-thirds percent; and

(3) dividing the product by 12.

(e) A grantee shall calculate capital costs for all items within a single class of assets using either the depreciation or the use allowance method. A grantee may not use both methods for a single class of assets. The department will accept classifications of assets according to similar uses, life expectancy, and treatment under the United States Internal Revenue Code. Classes of assets must separate buildings, computer equipment, office equipment, and vehicles.

(f) A grantee shall calculate the yearly capital cost of all component parts of a building by the same method and the same useful life as that the grantee uses for the building. A grantee may calculate the yearly capital cost of fixtures by a different method than the method by which the grantee calculates the costs for a building in which the fixtures are located.

(g) If a grantee has reported the yearly capital cost of an asset to the department as a use cost or as depreciation cost, the grantee may not change that characterization of the cost in any subsequent report to the department.

(h) The department will not reimburse a grantee for a depreciation or use allowance cost of an asset if the asset is fully depreciated.

(i) A grantee shall segregate any money received from the department as reimbursement for depreciation or use costs in a reserve fund that may be used only for replacement of capital assets used for residential child care. The assets of the fund may be invested only in investments of the kind described in AS 39.35.110. Replacement assets acquired with money from the fund must be dedicated to a public purpose related to residential child care for a period of 20 years after the date of their acquisition. Upon cessation of the grantee's activities as a residential child care facility, or dissolution, or bankruptcy of the grantee, or upon any attempt to divert money from the fund to other purposes, or to invest the fund in investments not permitted in this subsection, title to the fund must revert to the State of Alaska.

(j) For the purpose of this section

(1) "basis" means the lower of the purchase price or the fair market value at the time of acquisition or, for assets that were donated, the fair market value at the time of acquisition; and

(2) "accumulated depreciation" means the fractional part of the basis of an asset that is proportionately equal to the part of the useful life of an asset that has already passed.

Notes

7 AAC 53.945

Eff. 1/13/85, Register 93

Authority:AS 47.05.010

AS 47.40.011

AS 47.40.041