On March 14, Senators Pat Toomey and Doug Jones introduced the Restoring Investment in Improvements Act (the Act), which would make qualified improvement property (QIP) 15-year property and eligible for bonus depreciation under the Tax Cuts and Jobs Act (TCJA).
Toomey and Jones’ legislation corrects a drafting error in the TCJA formerly acknowledged by legislators. The final language of the TCJA failed to add QIP to the list of property classified as 15-year recovery period property. As a result, the cost of QIP is currently not eligible for bonus depreciation and instead depreciated over 39 years. Prior to the enactment of the TCJA, businesses could deduct 50 percent of those costs immediately as bonus depreciation. The Act would correct the error by adding QIP to the list of 15-year recovery assets.
In addition, the House Ways and Means Committee held a hearing on March 12 to discuss tax extenders for provisions of the TCJA set to expire between now and 2027, with 29 provisions that have already expired in 2017 and 2018. On February 28, Senate Finance Committee Chairman Chuck Grassley and Ranking Member Ron Wyden introduced legislation to retroactively extend the tax provisions that expired in 2017 and 2018 through the balance of the current year, as well as provide disaster relief for those affected by natural disasters in 2018. Other tax breaks that would be retroactively extended include deductions for mortgage insurance, college tuition and fees, debt forgiveness on foreclosures and medical expenses.
The proposal of legislation is an early step in the process before the QIP fix and extenders become law. Whether these provisions will ultimately become law is at this point uncertain.
DHG will continue to provide updates regarding any breaking updates to the tax code as it relates to the above topics.