The CARES Act ushered in several changes that had a positive impact on real estate owners. One provision that had a huge immediate impact was the retroactive correction of the recovery period for assets defined as Qualified Improvement Property (QIP) under the TCJA. By defining the recovery period of these assets as 15-year straight line, they become eligible for the TCJA 100% bonus provision. Many people heard this news and assumed that all post-TCJA interior improvements can be designated as QIP and therefore receive 100% bonus. In other words, people think that if an interior space underwent a gut renovation on or after 1/1/2018, all associated spend can be designated as QIP.
We here at Capstan have heard this line of thinking quite a bit lately, and we caution our clients to step back and review the definition of TCJA-QIP before making any assumptions. It cannot be assumed that all improvements made on after 1/1/2018 automatically qualify as TCJA-QIP. There are several nuances that need to be considered.