If you own or manage real estate, you may have just received a holiday gift from Congress. Signed on December 18th, the Protecting Americans from Tax Hikes (PATH) Act of 2015 continues an annual tradition of Congress waiting until December to determine the tax treatment of certain transactions that occurred during the year. In one case, the treatment of certain transactions was not determined until the following January. The cycle of lapse and reinstatement of these provisions (commonly referred to as “extenders”) have become an annual event, frustrating both taxpayers and planners. Needless to say, this late action has made income tax planning extremely difficult. The PATH Act not only provides more certainty with respect to the taxation of your 2015 transactions, but it also reduces the uncertainty you will face in the future. By extending certain tax provisions through either 2016 or 2019, and making several provisions permanent, this Act facilitates long-term tax planning.

Those provisions included in the Act that had previously expired as of December 31, 2014, have been retroactively reinstated, so that they are treated as having been in effect throughout 2015. The Act contains many provisions focused on incentives for investments, growth, innovation, charitable contributions and relief for families and individuals, along with some provisions that are not advantageous to shareholders. samsung window air conditioner 12000 btuClick here to read an overview of the major tax incentive and relief provisions, along with certain other provisions that were included in the Act. wall mounted ductless air conditioning units reviewsWe have also published more focused discussions of the changes related to Real Estate Investment Trusts (REITs) and credits and deductions for which you may be eligible. tempstar ac unit parts

The use of some of the credits may impact your depreciation deductions. This Bulletin focuses on the significant changes the PATH Act made to the income tax treatment of the acquisition and improvement of real estate, as follows: The passage of the PATH Act provides you with a short window of time to complete purchases of depreciable assets and place them in service prior to year end to obtain a current deduction if you operate on a calendar year basis. Even without such purchases, you may experience a reduction in your 2015 tax bill as a result of the retroactive effective date of many provisions the PATH Act, as well as the recently announced changes to the tangible property regulations. Cost Segregation Plus (CSP) studies can help uncover tax savings. A CSP provides a review of your real estate holdings that identifies components eligible for bonus depreciation, faster cost recovery, deductions and credits related to energy efficiency, benefits under the new repair and maintenance rules, and/or property tax considerations.

Some of the provisions that have been enacted retroactively with an effective date of January 1, 2015, may provide a refund opportunity if your business operates on a fiscal year basis. Please contact your Cherry Bekaert tax advisor to discuss how the PATH Act will impact your personal or business situation, and how we can help maximize the benefits available to you.On Dec. 18, 2015, Congress passed a tax extenders package, the Protecting Americans from Tax Hikes (PATH) Act of 2015, which modifies, extends, or makes permanent several depreciation-related provisions including:The Act extends bonus depreciation for property acquired and placed in service during 2015 through 2019 (with an additional year for certain property with a longer production period). The bonus depreciation percentage is 50 percent for property placed in service during 2015, 2016, and 2017, but then phases down to 40 percent in 2018 and 30 percent in 2019.For property placed in service before Jan. 1, 2016, bonus depreciation is available for qualified property that meets the following requirements:For property placed in service after Dec. 31, 2015

, bonus depreciation is available for qualified property that meets the following requirements:As indicated above, beginning in 2016, “qualified improvement property” replaces qualified leasehold improvement property in the list of bonus-eligible property. However, the definition of qualified improvement property is broader than the definition of qualified leasehold improvement property—so under the new rules, qualified leasehold improvement property is still eligible for bonus depreciation.Qualified improvement property is any improvement to an interior portion of a building that is nonresidential real property if the improvement is placed in service after the date the building was first placed in service, excluding: 1) enlargements; and 3) internal structural framework. The improvements do not need to be made pursuant to a lease.Bonus depreciation has generally been available since Sept. 11, 2001, with a period of expiration in 2005, 2006, and 2007, and has ranged from 30 percent to 100 percent over the years, as shown in this chart:Bonus depreciation may result in substantial present value tax savings for businesses that already had plans to purchase or construct qualified property.

Unlike section 179 expensing, taxpayers do not need net income to take bonus depreciation deductions. Further, bonus is not limited to smaller businesses or capped at a certain dollar level, but it is not available for used property, property used outside of the US, tax-exempt use property, or tax-exempt financed property.The provision makes permanent the 15-year recovery period for qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property.View the summary of qualified improvement property rules and bonus depreciation for 2015 and 2016.Qualified leasehold improvement property is any improvement to an interior portion of a building that is nonresidential real property and placed in service more than three years after the date the building was first placed in service. The landlord and tenant cannot be a related party excluding enlargements, elevators/escalators, common area work and internal structural framework. The improvement may be made by the lessee or by the lessor but must be made pursuant to a lease.

Qualified restaurant property is any section 1250 property that is a building (new building or existing structure) or an improvement to a building, if more than 50 percent of the building’s square footage is devoted to the preparation of, and seating for on-premises consumption of, prepared meals.Qualified retail improvement property is any improvement to an interior portion of a building which is nonresidential real property and placed in service more than three years after the date the building was first placed in service. Retail establishments that qualify include those open to the public and primarily in the business of the sale of goods (tangible personal property) to the general public and not services. Examples of these retail establishments include grocery stores, clothing stores, hardware stores, and convenience stores. Excluded from qualifying retail improvements are enlargements, elevators/escalators, common area work, and internal structural framework.As discussed above, qualified improvement property is any improvement to an interior portion of a building that is nonresidential real property if the improvement is placed in service after the date the building was first placed in service, excluding: enlargements, elevators/escalators, and  internal structural framework.

Qualified improvement property has a 39-year recovery period unless it also meets the definition of either qualified leasehold improvement property, qualified retail improvement property, or qualified restaurant property.Qualified restaurant and qualified retail improvement property placed in service before Jan. 1, 2016, are not eligible for bonus depreciation unless the improvements also satisfy the definition of qualified leasehold improvement property. After Dec. 31, 2015, QLHI and qualified retail improvements are, by definition, bonus-eligible because they are also qualified improvement property. Qualified restaurant property is bonus-eligible if the improvements are also qualified improvement property. For more information on this topic, or to learn how Baker Tilly tax specialists can help, contact our team.The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought.