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Dec. 18, 2015 — BOMA International’s lobbying efforts have resulted in a series of historic advocacy victories for the commercial real estate industry with the passage of the Protecting Americans from Tax Hikes (PATH) Act of 2015 by the U.S. Congress.
Included in the PATH Act are a permanent extension of the 15-year depreciation on qualified leasehold improvements, BOMA’s top tax priority; fixes to the Foreign Investment in Real Property Tax Act (FIRPTA); and a straight two-year extension of the energy efficiency deduction for commercial buildings.
Commercial building owners now have the economic certainty necessary to invest capital confidently, knowing they will be able to depreciate tenant improvements over 15 years instead of 39, a timeline that more closely aligns with the life of an average lease.
This will result in more tenant improvement projects, which will lead to more construction jobs and boost the U.S. economy. Over the past decade, the provision to reduce the depreciation timeline from 39 to 15 years had been extended, but often retroactively or at the last minute, not allowing building owners, managers, or tenants to take full advantage of the law.
Permanent 15-year depreciation is a big win for the health of both the commercial real estate industry and the economy.
The adjustments made to FIRPTA in the PATH Act will encourage more foreign entities to invest in America’s real estate, which will go a long way toward restoring economic vitality to the industry.
The new law increases the withholding threshold for foreign investors to hold an interest in U.S. real estate without triggering unnecessary tax liability from 5 to 10 percent, and it exempts foreign pension funds from the tax penalty.
These fixes come at a time when the country’s infrastructure needs are greater than ever, and they will help generate much-needed investment in real estate and infrastructure projects across the United States.
The two-year extension of the deduction for energy efficiency improvements for commercial real estate, also known as the 179D deduction, is a victory for building owners who are making investments in their properties to increase energy efficiency. BOMA International would like to see this deduction improved and enhanced to truly spur innovation in the commercial real estate’s market transformation toward greater efficiency in future legislation. But a two-year extension is a positive step in the right direction to incentivize building owners to invest in the efficiency of their buildings.
For more information on BOMA International’s federal advocacy efforts, visit the Industry Issues section of www.boma.org.
