BOMA International Scores Big Wins on Federal Tax Provisions
In April of 2020, following extensive lobbying by BOMA International and its CRE partners, the CARES Act restored the 15-year depreciation schedule for qualified leasehold improvements or Qualified Improvement Property (QIP).
Due to drafting error, the Tax Cuts and Jobs Act of 2017 reverted the depreciation period of leasehold improvements from 15 years to 39, significantly increasing the tax liability for real estate owners. Additionally, this error prevented QIP from being fully expensed.
After a 15-year effort, Section 179D “The Energy Efficient Commercial Buildings Tax Deduction” was made permanent. The provision provides a $1.80 per square foot deduction for energy efficient improvements to the building envelope that exceed the applicable ASHRAE 90.1 standard by 50%.
Since the deduction expired periodically, owners were not able to plan around use of the provision. Now that it is permanent, building owners can rely on the tax benefit when analyzing cost efficient improvements.
Looking forward to the 2021 Congressional Session, the BOMA Tax and Finance Task Force is examining several issues that are expected to arise. For one, BOMA is specifically concerned that Section 1031 on carried interest and like-kind exchange(s) provisions could be eliminated as they are often viewed as an easy way to fund other priorities, such as COVID relief and infrastructure upgrades.
Additionally, BOMA remains concerned that other real estate specific tax provisions will also be targeted to raise federal revenue. To protect your interests and sustain economic recovery, the Tax and Finance Task Force will continue to engage Congress to defend these important tax policies.