Key Tax Extenders Become Law

On Dec. 20, 2006, President Bush signed into law a bill (H.R. 6111) that extends the 15-year depreciation period for leasehold improvements and the immediate expensing of brownfields cleanup costs. The two provisions had expired at the end of 2005, but are now retroactive to Jan. 1, 2006, and will extend through 2007.

The new law also includes a one-year extension of the tax deduction for energy-efficient buildings that was part of the Energy Policy Act of 2005 and was set to expire at the end of 2007.

The law is a great victory for the commercial real estate industry, says Jason Todd, director of legislative and regulatory affairs for the Building Owners and Managers Association (BOMA) International. Without this new law, the depreciation period for leasehold improvements would have been 39 years. Todd points out that this new law makes sense because no one signs 39-year leases anymore, and improvements are likely to go out of service long before 39 years expire. Also, the 15-year depreciation period better reflects the marketplace because leases typically run seven years to 10 years, he adds.

BOMA will lobby for another extension of the 15-year depreciation period and, better yet, to make that depreciation period—or a shorter one—a permanent part of the U.S. tax code, says Todd. He informs us that a further extension of the 15-year depreciation period is being proposed as part of a package for small businesses to be included in the minimum wage bill currently before the Senate.

CLLI Source

Jason Todd: Director of Legislative and Regulatory Affairs, Building Owners and Managers Assn. (BOMA) International, 1201 New York Ave. NW, Ste. 300, Washington, DC 20005; (202) 326-6356; jtodd@boma.org.