Depreciation Technical Correction for Qualified Improvement Property

The 2017 TCJA consolidated certain categories of depreciable property known as (1) qualified leasehold improvement property, (2) qualified restaurant property, and (3) qualified retail improvement property into one category called qualified improvement property (“QI Property”). The Committee Reports to the TCJA indicated that a general 15-year recovery period was to have been provided for QI Property. However, that specific recovery period failed to be reflected in the statutory text. As a result, QI Property fell into the 39-year recovery period for nonresidential rental property. That also made it ineligible for 100% Bonus Depreciation.

The CARES Act provides a technical correction to the TCJA and specifically designates QI Property as 15-year property for depreciation purposes. This makes QI Property eligible for 100% bonus depreciation. QI property also is specifically assigned a 20-year class life for the Alternative Depreciation System.

This change is effective for property placed in service after December 31, 2017. IRS is expected to issue guidance for affected taxpayers with respect to 2018 and 2019 returns already filed, which would allow for amending returns or reflecting catch-up adjustments in the subsequent year.

If you would like additional information please contact your Gettry Marcus Advisor or Robert Thee, the author of this article.