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Made Any Improvements to Your Non-Residential Building Lately? CARES Act May Provide You a Big Benefit

April 02, 2020

By: Amanda Wilson 

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which was signed into law last week, contains an important fix to the 2017 Tax Cuts and Jobs Act that could provide a real financial benefit to non-residential real property owners. 

The Tax Cuts and Jobs Act provided for 100% bonus depreciation of real property if it had a recovery period of 20 years or less. It was intended that this would include qualified improvement property, which is any improvement to an interior portion of a non-residential building if the improvement is made after the property was placed in service. Excluded from qualified improvement property are improvements attributable to (1) enlargement of the building, (2) any elevator or escalator, or (3) the internal structural framework of the building.

Unfortunately, while the legislative history made clear that amounts paid for qualified improvements were to qualify for 100% bonus depreciation (i.e., a full write-off in the year the improvement was made), there was a technical glitch and the statute classified qualified improvement property as having a 39-year recovery period. As a result, bonus depreciation was unavailable. The CARES Act has finally fixed this glitch by providing that all qualified improvement property has a 15-year recovery period, and thus qualifies for 100% bonus deprecation. This change applies retroactively as if it had always been part of the Tax Cuts and Jobs Act.

What does this mean for businesses that made improvements to their real property? They should look at the extent to which they made any qualified improvements since September 27, 2017, and, to the extent they did, they should consider filing amended tax returns for the years in which those improvements were made. The ability to claim 100% bonus depreciation for these improvements could result in a significant tax refund check. 

Industries such as retail and hospitality could benefit the most from this tax fix and should reach out to their tax advisors about this change.

Be sure to visit our Coronavirus (COVID-19) Response Team page to keep up to date on the latest news.

This article is informational only. You should consult an attorney before acting or failing to act. The law may change rapidly and no warranty is given. LOWNDES DISCLAIMS ALL IMPLIED WARRANTIES AND WITHOUT LIMITATION, ANY WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE. ALL ARTICLES ARE PROVIDED AS IS AND WITH ALL FAULTS. Consult a Lowndes attorney if you wish to establish an attorney/client relationship.

A member of the firm’s tax practice, Amanda Wilson concentrates on federal tax planning and structuring. She represents clients in a wide variety of complex federal tax matters with a particular emphasis on pass-through entities such as partnerships, S corporations and real estate investment trusts.

Specifically, Amanda focuses on advising clients on the formation, operation, acquisition and restructuring of such pass-through entities. In addition, she regularly advises clients on the structuring and operation of private equity funds, real estate funds and timber funds. Amanda is the author of the Bloomberg Tax Management Portfolio 718-3rd Edition, Partnerships- Disposition of Partnership Interests or Partnership Business; Partnership Termination.

Amanda regularly works in structuring deals to benefit from tax advantaged structures, including like-kind exchanges, new market tax credits, low income housing tax credits, qualified opportunity zones, and investment tax credits available for solar and other renewable energy. Amanda also has extensive experience in corporate planning and international tax matters, as well as federal tax controversy. Her practice before the Internal Revenue Service (IRS) includes providing advice on audits and appeals, drafting protests and ruling requests, and negotiating settlements.

Prior to joining the firm, Amanda worked for Sutherland Asbill & Brennan LLP (now Eversheds Sutherland), an Am Law 100 firm in the Atlanta office, where she was part of Sutherland’s Tax Practice Group. Amanda has also served as an adjunct professor at Emory University School of Law where she taught Partnership Taxation.

Amanda regularly contributes to the firm’s Taxing Times blog and is a regular panelist on tax webinars hosted by Strafford Publications.

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