September 2018
Wednesday, September 26, 2018
Complexities Emerge In The OZones: QIP
The Fixtures Fix:
Correcting the Drafting Error Involving the Expensing of Qualified Improvement Property
by Erica York May 30, 2018
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Introduction
Removing barriers to business investment in the United States was one of the central goals of the Tax Cuts and Jobs Act (TCJA), enacted last December. One of the key provisions in the bill, known as “100 percent bonus depreciation,” allows businesses to immediately deduct the cost of short-lived investments—limiting the penalty that the federal tax code placed on businesses that make capital investments in the United States.
For instance, many interior improvements to buildings are not eligible for the provision, and will be required to be written off over time periods as long as 39 years. This exclusion is widely believed to have been due to a legislative oversight: Congress seems to have intended building improvements to be eligible for 100 percent bonus depreciation, but left them out due to a last-minute drafting error. As a result, the new tax law actually worsens the tax treatment of this type of investment, which previously qualified for bonus depreciation, by reducing the ability of businesses to deduct their full building improvement costs.
As such, the exclusion of building improvements from the benefit of 100 percent bonus depreciation—whether accidental or not—is unjustified. Policymakers should act to ensure that qualified improvement property is eligible for 100 percent bonus depreciation; at a minimum, they should make sure that the rules for deducting the cost of building improvements do not become more restrictive than they previously were.
Overview of Expensing
Under the U.S. tax code, businesses can generally deduct their ordinary business costs when figuring their income for income tax purposes. However, this is not always the case for the costs of capital investments, such as equipment, machinery, and buildings. Typically, when businesses incur these sorts of costs, they must deduct them over several years according to depreciation schedules instead of immediately in the year the investment occurs.[1]
Full expensing, however, allows businesses to immediately deduct 100 percent of the cost of their capital expenses. Thus, it removes a bias against investment in the tax code and lowers the cost of capital, encouraging business investment.
Qualified Improvement Property
Prior to the Tax Cuts and Jobs Act, the tax code categorized certain interior building improvements into different classes:
- qualified leasehold improvement property,
- qualified restaurant property
- qualified retail improvement property.
Improvement property generally includes interior improvements made in buildings that are nonresidential real property.
> If a business invested in new lighting, exit signs, or woodwork, these investments would generally be categorized as improvement property.
> Or consider a restaurant or retail store, perhaps with lots of foot traffic, and as a result it needs new permanent floor coverings; such an investment would also generally be qualified improvement property.
The definition excludes improvements made to enlarge a building, for an elevator or escalator, or to the internal structural framework of a building.[3]
The PATH Act of 2015 created a fourth category, qualified improvement property (QIP), to extend bonus depreciation to additional improvements to building interiors.[4]
Under this new definition, unlike the other three types of improvement property, eligibility did not require that QIP investments be made under a lease.
It also did not require a three-year lag between when the building was first placed in service and when the improvement property was placed in service.
A notable feature of QIP, however, was that it did not have a cost recovery period of 15 years; for QIP to be recovered over a 15-year period, it had to also meet the definition of one of the other three types of improvement property.[5]
This means that in some instances, QIP may have qualified for bonus depreciation, but the remaining basis would have been depreciated over a 39-year period.
This created complexity across different categories and definitions of improvement property.
Mixing-Up Art & Politics Here In Downtown Mesa
Sure, Why Not? While it might be a stretch to prove that the $100M Mesa Arts Center has delivered on its promise to be the engine for economic development for downtown Mesa after 13 years, there is at least one internationally-successful fine artist who lives and works downtown in his self-constructed knock-out iron convex studio who's offered to be the venue for "The Art of Politics" on Wednesday, October 17 2018 from 6-8 pm.
It's billed by Candidate Jennifer Duff, who's running against Jake Brown in a contested race to represent District 4 on the Mesa City Council, as "an evening of art and citizenship".
Meet fine artist Bill Barnhart for a preview on-site at his studio gallery to preview new works from weeks enjoyed in a small Spanish city.(one is inserted below)
More details can be found on Facebook > by clicking or tapping your screen here
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It's billed by Candidate Jennifer Duff, who's running against Jake Brown in a contested race to represent District 4 on the Mesa City Council, as "an evening of art and citizenship".
Meet fine artist Bill Barnhart for a preview on-site at his studio gallery to preview new works from weeks enjoyed in a small Spanish city.(one is inserted below)
More details can be found on Facebook > by clicking or tapping your screen here
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OCT17
The Art of Politics
Public
· Hosted by Jen Duff
Candidate for Mesa City Council District 4 To Host A Get-Out-The-Vote Event in Pioneer Park
There's a lot riding on the line depending on the choice you make to engage residents for more effective government
One is diversity: Jennifer Duff, who if qualified by your informed judgment, might be one of the few women ever elected to the city council.
One is continuity: Jake Brown, who if qualified by your informed judgment, has been endorsed by his second-cousin incumbent Chris Glover who has served the 2-term limit.
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SEP29
Meet Me at the Park
Public
MUSIC - BALOONS - PAN DULCE & CONCHAS
More Information > https://www.facebook.com/events/1153600694802508/?active_tab=about
Event Tonight: Happy Talk For ASU Downtown Mesa
This has been a controversial proposal for more than two years for good reasons.
A "pretty picture" does not make this happen with an exaggerated perspective that's way out-of-scale to the reality of this radical transformation.
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SEP26
ASU Downtown Mesa
Public
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DETAILS: (Directly from the event notice)
ASU is coming to downtown Mesa.
Join us as we host representatives from ASU to talk about their plans for the campus, its programs, and how it will interact with our downtown.
The presentation will cover:
- Overview of the basic tenets of the joint venture between the City and the University.
- Overview of the academic plan and enterprise/economic development activities.
- Proposed community partnerships and collaborations.
- Description of the current plan for the physical facility and amenities for both students and community members.
ASU presenters will be:
------ Warde Nichols, Executive Director, Office of Government & Community Engagement
------ Jake Pinholster, Associate Dean, Policy and Initiatives and Associate Professor, Performance Design Herberger Institute for Design and the Arts
The presentation will cover:
- Overview of the basic tenets of the joint venture between the City and the University.
- Overview of the academic plan and enterprise/economic development activities.
- Proposed community partnerships and collaborations.
- Description of the current plan for the physical facility and amenities for both students and community members.
ASU presenters will be:
------ Warde Nichols, Executive Director, Office of Government & Community Engagement
------ Jake Pinholster, Associate Dean, Policy and Initiatives and Associate Professor, Performance Design Herberger Institute for Design and the Arts
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