On Tuesday, December 16th the U.S. Senate passed H.R. 5771 by a 76 to 16 vote reviving dozens of previously expired tax breaks for calendar year 2014 only.
Republicans and Democrats compromised on the one-year extension after the White House undercut negotiations on a broader bipartisan package, underscoring divisions between Democrats in the wake of this year’s heavy losses at the election polls this past November. Senators from both parties indicated that they would have preferred legislation that would have restored the tax extenders through calendar year 2015 (e.g., a 2 year extension package that would have retroactively reinstated the tax extenders for calendar year 2014 and forward through all of calendar year 2015). The bill is now awaiting President Obama’s signature in order for the bill to become law. It is highly anticipated that the President will sign this bill into law before the calendar year-end.
The primary tax extenders affecting the Real Estate industry include, but are not limited to:
• I.R.C. § 168 provision allowing 15-year Straight-Line Cost Recovery for Qualified Leasehold Improvements, Qualified Restaurant Buildings and Improvements, and Qualified Retail Improvements;
• I.R.C. § 168 Bonus First-Year Depreciation (i.e., for certain property with longer production periods, the property must be placed in service before 01/01/16);
• I.R.C. § 45 Tax Credits with respect to Facilities Producing Energy from Certain Renewable Sources;
• I.R.C. § 45L Energy Tax Credit for Energy-Efficient New Homes; and
• I.R.C. § 179D Energy Tax Deduction for Building Envelope Efficiency.
It should be duly noted that the tax extenders are for a one year period retroactive to January 1, 2014. Property that qualifies for I.R.C. § 179 and for Bonus depreciation must be placed in service prior to December 31, 2014.
For legislative updates from Capitol Hill and complete coverage of the latest statutory, administrative, and judicial interpretations please connect with Peter J. Scalise on TaxConnections.