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Since our agency has a policy to capitalize all equipment items costing $1,000 or more, can we still include those items in the equipment category, Code 20?

No.  For grants and grant contracts awarded by SED, only those items with a unit cost of $5,000 or more can be reported in Code 20, Equipment.   Other items with a unit cost less than $5,000 must be reported in Code 45, Supplies and Materials.