Tax Cuts and Jobs Act (H.R. 1) Signed into Law on 12/22/17
Even in all the holiday rush, it was impossible to miss the much-anticipated news of President Trump signing the Tax Cuts and Jobs Act (H.R. 1) into law. The “TCJA” represents the first comprehensive tax law reform in over three decades. This legislation will have a resounding effect for years to come, and it’s no overstatement to say that this law may impact every American industry and individual taxpayer. The TCJA brings new opportunities, as well as some challenges, to the commercial real estate community.
Here at Capstan, we are digging deep into the 500+ pages of the law, working hard to clarify and distill the most relevant legislation. We want to be certain that our clients understand how to make these legislative changes work in their favor, and we’ll be updating our website with pertinent details in the very near future. We’ll also have a new slate of CPE offerings that focus on the implications to CRE owners, so we can walk you through the changes and discuss the potential opportunities.
In the meantime, there is one important point that requires emphasis now. Most of the Act’s provisions don’t become effective until January 1, 2018, and won’t affect your TY 2017 efforts. However, one major rule is actually retroactive, and may have a positive impact on your year-end numbers. Bonus depreciation was established at 50% for TY 2017 under the PATH Act. However, the TCJA increases Bonus to 100% for properties acquired and placed-in-service after 9/27/17. Furthermore, the TJCA eliminates the requirement that property must be new to be Bonus-eligible. In a tremendous boon to real estate owners, acquisitions are now eligible for Bonus treatment as well. In this case, taxpayers do need to be aware of the written binding contract rules to ensure that they are properly applied regarding acquired properties. Please be sure to consult with your tax professional for specifics as you finalize plans for your 2017 filings.
Capstan will also be working with clients to update Cost Segregation reports already issued that are positively impacted by the retroactive 100% bonus post 9/27/17.
We are at your service as we all navigate the impact of this legislation. If you have specific questions that you’d like to discuss now, please feel free to call Terri, Bruce, Ziv, or Carly for a personal consultation. Also, be sure to keep your eye on this blog and our website – we’ll have the Capstan take on the TJCA as soon as possible.
Thanks for your valuable insight on the changes to QIP in regards to related party transactions and bonus depreciation percentages under the new TCJA (12/22/17).
I have a 2017 leasehold improvement that would be considered an adaption, but want to make sure that the asset is NOT excluded from QIP under “internal structure and framework of a building”.
Can you give me examples of what this exclusion from QIP is?
Good afternoon. Thank you for your question regarding QIP. Items which may not be excluded could be interior lighting systems, interior walls (so long as they are not load bearing), suspended ceilings, fire/safety systems interior to the building, floor materials such as ceramic tile, plumbing for bathrooms, and base building electrical systems. There are more and I can give a more direct answer to your scenario if you would like to share your scope of work.
Please let me know if this helps to answer your question. Feel free to give me a call if you like at 215-885-7510.
Thanks and have a great rest of the week.