TAM 200031001: General-use optometry equipment did not qualify for disabled access credit

Plain-English summary

An optometrist claimed the section 44 disabled access credit for a visual field analyzer and a hand-held eye imaging device. Both could be used with patients in wheelchairs, but they also served patients generally and provided new diagnostic functions. The IRS concluded that the purchases were ordinary equipment acquisitions, not expenditures shown to be needed for compliance with the Americans With Disabilities Act. Their incidental accessibility benefits did not make the costs eligible access expenditures. The credit therefore did not apply to these purchases, even though the practice was an eligible small business.

Ruling snapshot

• Question: Did the optometrist's two equipment purchases qualify as eligible access expenditures for the section 44 credit?
• Outcome: Advice given; neither purchase qualified on the facts presented.
• Key authorities: IRC § 44(c); Americans With Disabilities Act of 1990.

Full text (IRS public release)

                     INTERNAL REVENUE SERVICE
           NATIONAL OFFICE TECHNICAL ADVICE MEMORANDUM
                                         Feb. 28, 2000

Number:        200031001
Release Date: 8/4/2000
Index Number: 44.60-00 44.62-00
Control Number:TAM-114549-99/CC:DOM:P&SI:B6

District Director

     Taxpayer’s Name:
     Taxpayer’s ID Number:
     Taxpayer’s Address:

     Tax Years Involved:
     Date of Conference:

LEGEND:
Taxpayer            =

$a                  =
$b                  =

$c                  =

$d                  =

ISSUE:
     Are amounts expended by Taxpayer to acquire certain
equipment for use in his optometry practice eligible access
expenditures for purposes of section 44 of the Internal Revenue
Code?

CONCLUSION:
     The amounts expended by Taxpayer to acquire certain
equipment for use in his optometry practice do not qualify as
eligible access expenditures for purposes of section 44 of the
Code because the equipment was acquired in the normal course of
Taxpayer’s business rather than to comply with applicable
requirements of the Americans With Disabilities Act of 1990.

FACTS:
     Taxpayer is an optometrist who examines eyes and prescribes
lenses for his patients. Taxpayer conducts his business in two
separate office locations.
TAM-114549-99                - 2 -

     In 1996 Taxpayer purchased a Humphrey Field Analyzer (HFA)
for $a. The HFA sits on a variable height table and is used to
plot the visual field of the patient. Because it sits on a
variable height table the HFA can be used to examine patients in
wheelchairs. In addition, many tests available with the HFA
could not be performed with the equipment previously used by
Taxpayer. Information provided to Taxpayer by the selling
company indicated that the HFA may be eligible for the disabled
access credit provided by section 44 of the Code. Taxpayer
claimed a disabled access credit of $b with respect to the HFA on
his 1996 federal income tax return.
     In 1997 Taxpayer purchased an EyeSys Vista (EV) hand-held
topographer for $c. The EV is used to make a map of the eye and
to screen for irregularities of the eye. It provides information
about the cornea not obtainable by any other method. Because the
EV is hand-held and controlled by the tester, it can be used to
treat any patient. The selling company’s brochure for the EV
indicates that it is wheelchair accessible. Taxpayer claimed a
disabled access credit of $d with respect to the EV on his 1997
federal income tax return.

LAW AND ANALYSIS
     Section 44(a) of the Code provides a disabled access credit
(credit) equal to 50 percent of the eligible access expenditures
incurred by an eligible small business for any taxable year that
exceed $250 but do not exceed $10,250. An eligible small
business’ maximum credit for a taxable year is $5,000.

     Section 44(b) of the Code provides that a business is an
eligible small business if, for the preceding taxable year,
either its gross receipts did not exceed $1,000,000 or the number
of its full time employees did not exceed 30.

     Section 44(c)(1) of the Code provides that eligible access
expenditures are expenditures made by an eligible small business
in order to enable the business to comply with the applicable
requirements of the Americans With Disabilities Act of 1990,
Public Law 101-336 (ADA). Section 44(c)(2)(D) provides that
eligible access expenditures include amounts paid or incurred to
acquire or modify equipment or devices for individuals with
disabilities.

     The ADA is a national mandate to eliminate discrimination
against individuals with disabilities. Section 302 of the ADA
provides that no individual may be discriminated against on the
basis of disability in the full and equal enjoyment of the goods,
services, and facilities of any place of public accommodation by
any person who owns or operates a place of public accommodation.
TAM-114549-99                - 3 -

In addition to removing architectural barriers, places of public
accommodation must make reasonable modifications to their
practices or procedures to accommodate disabled individuals.
Under section 301(7)(F) of the ADA the term "public
accommodation" includes the professional offices of health care
providers.

     In the present case Taxpayer’s optometry practice is an
eligible small business within the meaning of section 44(b) of
the Code. The only issue presented for our consideration is
whether the amounts expended by Taxpayer to acquire the HFV and
the EV qualify as eligible access expenditures under section
44(c).

     Section 44 of the Code was enacted to help ease the cost to
small businesses of ADA compliance. The legislative history of
section 44 shows Congress was concerned that the requirements of
the ADA could impose a severe financial burden on certain small
businesses. Because of this burden, Congress provided these
small businesses with a tax credit for a portion of the costs
incurred in complying with the requirements of the ADA. See 136
Cong. Rec. 30541 (1990) (Senate Finance Committee Report).
Section 44(c)(1), by limiting eligible access expenditures to
expenditures incurred by a business that enable the business to
comply with the applicable requirements of the ADA, reflects the
Congressional purpose to associate the credit with ADA compliance
costs. Accordingly, under the Code, not every expenditure that
benefits the disabled is an eligible access expenditure; only
expenditures made to comply with ADA requirements are eligible
access expenditures.

     In the present case it has not been shown that the equipment
at issue was designed to address particular concerns of the
disabled. This equipment has a general applicability and
usefulness to all patients, disabled or non-disabled. The
primary benefit of the equipment is to Taxpayer in his practice,
although there may be incidental benefits to disabled patients.
The equipment is the type that would have been acquired in an
optometry practice’s normal course of business. Generally,
expenditures for equipment of this nature are not made for ADA
compliance and, accordingly, do not qualify as eligible access
expenditures within the meaning of section 44(c)(1) of the Code.

     Taxpayer has noted that a business’ architectural
modifications can be used by all business customers in the same
way as a doctor’s medical equipment can be used by all patients,
and that the credit is available for the general-use
architectural modifications. However, this comparison is not
pertinent because, while the ADA requires that architectural
modifications providing access to disabled individuals must be
TAM-114549-99                - 4 -

made to places of public accommodation where such access does not
already exist, it has not been shown that the ADA requires the
acquisition of the specific medical equipment at issue in this
case. The ADA requires doctors to make their professional
services available to disabled individuals through reasonable
modifications to existing practices or procedures if necessary to
avoid discrimination. Acquisitions of equipment of general
applicability are generally acquisitions of equipment in the
normal course of business rather than reasonable modifications of
existing practices for ADA compliance.

CAVEAT:
     A copy of this technical advice memorandum is to be given to
Taxpayer. Section 6110(k)(3) of the Code provides that it may
not be used or cited as precedent. Temporary or final
regulations pertaining to one or more of the issues addressed in
this technical advice memorandum have not yet been adopted.
Therefore, this memorandum will be modified or revoked by the
adoption of temporary or final regulations to the extent the
regulations are inconsistent with any conclusion in the
memorandum. See section 17.04 of Rev. Proc. 2000-2, 2000-1
I.R.B. 73, 97.


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