by Brianna Crandall — January 9, 2013—The Building Owners and Managers Association (BOMA) International commends Congress for passing an extension of the 15-year timeline for depreciating leasehold improvements for years 2012 and 2013. The tax extenders package was part of the American Taxpayer Relief Act (H.R. 8) passed on January 1, 2013, which also includes such provisions as extending emergency unemployment compensation benefits and federal funding for extended benefits for unemployed workers for one year.
The provision permits building owners to depreciate leasehold improvements over 15 years rather than a 39-year schedule, which more closely reflects the realities of a marketplace where leasehold improvements typically do not last longer than 15 years before they are replaced, notes BOMA.
“Continuing the leasehold depreciation 15-year schedule helps a recovering economy by increasing investment in commercial real estate and employment in related industries, such as architectural and design firms, construction companies, building suppliers and other construction-related services,” said BOMA International Chair Joseph W. Markling, managing director of Strategic Accounts at CBRE.
According to BOMA, a 15-year leasehold depreciation schedule spurs job creation and economic growth, as almost $250 billion is invested in commercial real estate improvements annually, with $15 billion of that amount going to leasehold improvements. Depreciating improvements over 39 years is said to reduce investment in improvements.
BOMA International is a federation of 93 BOMA U.S. associations, 11 BOMA Canada regional associations, and 13 BOMA international affiliates. Founded in 1907, BOMA represents the owners and managers of all commercial property types, including nearly 10 billion square feet of U.S. office space. Its mission is to advance the interests of the entire commercial real estate industry through advocacy, education, research, standards and information.