by 
The Curious Bag
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Uniform Capitalization, or UNICAP, is a provision in the United States tax code (Section 263A) that prescribes uniform rules governing the expenditures that can be capitalized by the taxpayer.
Capital Expenses
In accounting, the term "capitalize" means recording expenses as long-term assets to delay recognizing the expense. This allows companies to deduct current expenses without suffering any immediate negative effect to revenue.
What Can Be Capitalized
UNICAP requires taxpayers to capitalize all direct and indirect costs during pre-production and pre-sale periods along with the costs of actual production. Before UNICAP, direct and indirect costs for the production period alone were capitalized.
Features of UNICAP
Under UNICAP, some costs that can be capitalized include design costs, bidding expenses, purchasing, materials, labor, production, storing and handling.
Significance
All trades or businesses carried that are for-profit are subject to UNICAP rules as long as they produce real or tangible personal property for use in the business or for sale to customers. Businesses acquiring property for resale are also subject to UNICAP unless their average annual gross receipts are $10 million or less.
History of UNICAP
UNICAP was introduced in the Tax Reform Act of 1986.
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