On Oct. 9, AGC joined industry allies in urging Secretary of the Treasury Steven Mnuchin to have the Internal Revenue Service (IRS) issue interim guidance to correct a drafting error from the Tax Cuts and Jobs Act (TCJA) that accidentally changed the depreciation period for certain commercial real estate improvements to 39 years, instead of 15 years—or even less.
During the drafting of TCJA, the tax writers consolidated the restaurant, retail, and leasehold improvements (essentially the interior improvements to commercial property) depreciation schedule into a new category, now called qualified improvement property (QIP). Unfortunately, in doing so, they cross-referenced the incorrect section of the tax code that changed the depreciation schedule from 15-years (and eligible for temporary 100 percent bonus depreciation) to 39 years. This was clearly a drafting error that would normally qualify as a “technical correction” but a political stalemate has prevented passing a technical corrections bill.
As a result, those industries and companies affected by this glitch, including the construction industry, have called for Treasury to issue interim guidance to correct the problem while Congress fixes the statutory language. In August, AGC co-signed a letter to Treasury requesting action from Secretary Mnuchin on this issue, and on Tuesday followed up with issuing formal regulatory comments for a Treasury’s proposed for bonus depreciation.
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