On July 11, the House passed legislation (H.R. 4718) with a vote of 229-192 that would make permanent so-called bonus depreciation. The measure allows firms, including multifamily operators, to immediately deduct 50 percent of qualifying new equipment purchases as opposed to having to depreciate the entire expense over a period of years. However, the White House has threatened to veto the legislation, which it calls a “corporate giveaway” that would add hundreds of billions to the deficit over the next decade.
While bonus depreciation may be of benefit to larger multifamily firms, smaller operators should also be aware that the House approved legislation (H.R. 4457) last month that enables firms with annual investments of under $2 million to permanently write off the entire amount of qualifying investments in the year of purchase, up to a maximum of $500,000. Without legislation, small businesses can in 2014 immediately deduct only $25,000 in investment costs this year.
As the House continues to move tax extenders on a piecemeal basis, the Senate remains stalled in a clash over which amendments may be offered to the Expiring Provisions Improvement Reform and Efficiency (EXPIRE) Act (S. 2260) that is focused on renewing expired tax provisions for two years through 2015. Currently, few expect the Senate to pass the EXPIRE Act in the near-term, though there remains optimism the chamber will eventually take action.
The outlook for tax extenders is also complicated by a division between the House and Senate over whether expiring tax provisions should be extended permanently, instead of on a short-term basis. Unfortunately, this disagreement is likely to delay final legislation until after the November elections regardless of whether the House and Senate are able to pass their own versions of legislation.
- Real Estate Industry Urges Congress to Correct Depreciation Oversight in Tax Cuts and Jobs Act Legislation
- Real Estate Coalition ADS Tax Reform Letter to House Ways and Means Committee
- Senate Finance Committee Task Forces Focus on Expired Tax Provisions
- NMHC and NAA Comment on Ways to Maximize the Positive Impact of Opportunity Zones
- NMHC and NAA HUD Opportunity Zones Comment Letter - June 2019