Emergency Legislation Benefits Commercial Properties

MBA (10/3/2008 ) Murray, Michael
The Senate added tax provisions for energy-efficient properties and depreciation recovery extensions on brownfields and leasehold improvements Wednesday to H.R. 1424, the Emergency Economic Stabilization Act of 2008. The House votes on the bill today.

Key provisions:

• The supplemental tax provisions would extend tax deductions for energy-efficient commercial buildings five years, from December of this year to December 31, 2013.

• The bill provided extensions on Superfund payments for environmental remediation costs, including brownfields, paid or incurred after December 31, 2007 through December 31, 2009.

• If passed by the House, the bill would also extend 15-year “straight-line cost recovery” for depreciation of certain leasehold and restaurant improvements and 15-year straight-line cost recovery for certain improvements to retail space.

• The legislation would apply to restaurant properties in business after December 31, 2007 and extend to January 1, 2010. The bill defined restaurant property as “more than 50 percent of the building’s square footage devoted to preparation of, and seating for on-premises consumption of, prepared meals.”

However, restaurant businesses starting after December 31 this year—or improvements following this year—would not qualify for bonus depreciation.

For retail improvement properties, qualified properties would include businesses starting after December 31 of this year. “Qualified retail improvement property” would apply to any improvement to an interior portion of a building, which is nonresidential real property, if that portion was open to the general public and used in the retail trade or business of selling tangible personal property to the general public.

If the improvement was placed in service more than three years after the date the building was first placed in service, it would also apply for the bonus depreciation, the bill said.

Improvements not included in the depreciation bonus would include building enlargement, elevators or escalators, any structural component that would benefit “a common area or the internal structural framework of the building.”