Legislative Fix for Qualified Improvement Property (QIP)


Sacramento Valley Chapter Member David Fogel, EA, CPA is alerting Members to forthcoming legislation designed to correct a drafting error regarding the definition of QIP:

“As you may know, the Tax Cuts and Jobs Act of 2017 (P.L. 115-97) eliminated the separate definitions of “qualified improvement property,” “qualified leasehold improvement,” “qualified restaurant property,” and “qualified retail improvement property,” and consolidated them all into a general category of 15-year recovery property. The Conference committee report states, “the conference agreement provides a general 15-year MACRS recovery period for qualified improvement property.” H. Rept. 115-466 (115th Cong., 1st Sess., 12/15/2017), p. 367.

However, in amending IRC §168(e)(6), Congress failed to specify in the statute that “qualified improvement property” is 15-year recovery property. As a result, QIP is 39-year recovery property that is ineligible for bonus depreciation because to qualify for bonus depreciation, the property must have a recovery period of 20 years or less. IRC §168(k)(2)(A)(i)(I).

The tax community has been asking Congress to fix this drafting error in the statute. It is clear from the Conference committee report that Congress wanted QIP to be 15-year recovery period, but they just didn't say this in the statute.

To correct the drafting error, on March 14, Pat Toomey (R-PA) and Doug Jones (D-AL) introduced the Restoring Investment in Improvements Act (S. 803) in the Senate, and on March 26, Jimmy Panetta (D-CA) and Jackie Walorski (R-IN) introduced parallel legislation (H.R. 1869) in the House.”

We thank David for making Members aware of this legislation.

This news was shared by CSEA Tax Research Specialist Joe Calderaro, EA.