NMHC and other real estate trade associations on March 3 requested that the Treasury Department and Internal Revenue Service (IRS) issue guidance permitting an automatic change in the method of accounting for taxpayers impacted by a provision enacted last December that permits a 30-year depreciation period for certain multifamily property placed in service before 2018. Prior to this legislative change, the applicable depreciation period for multifamily property was 40 years for taxpayers electing to retain the full deductibility of business interest.
To apply a 30-year depreciation period instead of a 40-year period, taxpayers are required to change their method of accounting, which typically requires consent from the IRS Commissioner. As requiring taxpayers to seek consent is unnecessarily burdensome for both taxpayers and the government, the industry letter requests that the Treasury Department and the IRS allow taxpayers to make an automatic change in their method of accounting.
Additionally, the industry letter requests that the government issue guidance enabling partnerships subject to the centralized partnership audit regime to file an amended return and make a late Section 163(j) election and issue amended Schedules K for tax years beginning in 2018 and 2019. While many taxpayers can make a late Section 163(j) election on an amended return until October 15, 2021, partnerships subject to the centralized partnership audit regime must file a so-called administrative adjustment request.
As the government provided such relief to partnerships seeking to avail themselves of beneficial retroactive changes made under the CARES Act, the industry made the case that it is appropriate to do likewise for purposes of the 30-year depreciation provision.
For more information on NMHC’s advocacy work on this topic, please visit our business interest deductibility webpage.
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