On August 16th several members of the Senate Finance Committee wrote a plainly-worded missive to the Treasury Department, clearly stating their intentions regarding QIP and requesting a technical correction that would reflect their legislative intent.
“Specifically, in eliminating the separate definitions of qualified leasehold improvement, qualified restaurant, and qualified retail improvement property and providing a new single definition of qualified improvement property, the language in section 13204(a) failed to designate qualified improvement property as 15-year property…”
The architects of tax reform did succeed in retiring QLI and its derivations. As of 1/1/2018, QLI, QRI, and QRIP no longer exist, and QIP was intended to neatly replace all three property categories. However, in what was clearly a drafting error, the authors simply didn’t designate QIP as 15-year property.
Not convinced? Read on.
“Congressional intent was to provide a 15-year MACRS recovery period and a 20-year ADS recovery period for qualified improvement property.”
Can’t say it more clearly than that.
However, the matter can only be rectified by an official technical correction. And while it’s great that QIP is getting so much attention on the Hill, nothing is certain. So, until or unless the correction is issued – the “new” QIP is 39-year and is not eligible for Bonus.
This may leave taxpayers feeling frustrated. QLI, which was Bonus-eligible in many tax years, no longer exists. And unless a correction is issued, QIP is also not eligible for Bonus depreciation. At the moment, cost segregation offers the only fully defensible path to the 100% Bonus provisions now available. In these uncertain times we’re seeing a lot of folks fall back on the reliable old standby – accelerated depreciation. Please feel free to reach out to the Capstan team to further discuss strategies to ensure you are taking full advantage of the myriad of opportunities for accelerating depreciation.