Jobs Bill Contains Favorable Depreciation Rules for Tenant Improvements, Says NAR 6/17/2004
From: Linda M. Johnson of the National Association of Realtors(r), 202-383-7536 or lmjohnson@realtors.org WASHINGTON, June 17 -- The National Association of Realtors(r) commended the U.S. House of Representatives for passing legislation today that will temporarily reduce the tax recovery period for leasehold tenant improvements from 39 years to 15 years. The leasehold provision is included in the American Jobs Creation Act of 2004, H.R. 4520, introduced by House Ways and Means Chairman Bill Thomas (R-Calif.). NAR supports a significantly reduced depreciation period for leasehold improvements, which are defined as permanent enhancements made to commercial buildings on behalf of tenants. The legislation now goes to a conference committee to be reconciled with the Senate version of the tax modernization bill. In addition to the leasehold provision, the House bill also includes tax deductions for brownfields clean-up expenditures and important technical modifications to Real Estate Investment Trust rules. "Realtors(r) applaud the House for passing legislation that will substantially reduce the depreciation period for tenant improvements and provide other tax incentives for real estate investments," said NAR President Walt McDonald, broker-owner of Walt McDonald Real Estate in Riverside, Calif. "Improved tax treatment for leasehold improvements will help spur capital investment in commercial real estate and create jobs." Approximately $15 billion of the $250 billion invested annually in commercial real estate goes into leasehold improvements such as carpeting and fixture or wiring upgrades that typically are done when the lease turns over. The impact of that figure doubles as it filters through the economy in the form of increased productivity and jobs for construction and remodeling companies, building material suppliers and related industries. "The Department of Treasury, Congressional Research Service and several studies have all verified that the current law is unfair in its treatment of leasehold depreciation. This legislation rights a wrong," McDonald said in a letter to Chairman Thomas. "The leasehold improvement provision is also consistent with the legislation's goal of enhancing productivity and increasing jobs. Making these improvements enables owners and/or tenants to create numerous jobs in construction trades. Thus, the provision has the dual benefit of both enhancing business output and increasing capital expenditures as new jobs come on line." ------ The National Association of Realtors(r), "The Voice for Real Estate," is America's largest trade association, representing 1 million members involved in all aspects of the residential and commercial real estate industries. Information about NAR is available at http://www.realtor.org. This and other news releases are posted in the Web site's "News Media" section. |