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Shopping Centers Today -> May 2002
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TAX-RELIEF EFFORT CONTINUES
By Dave Bodamer
An ICSC-backed Congressional bill would make permanent some temporary property-depreciation provisions included in the economic stimulus bill signed by President George W. Bush in March.
As it currently stands, the economic stimulus law will cut costs for owners buying or renovating property by enabling them to lower the book value immediately, thus cutting down on annual property tax payments. The law, called the Job Creation and Worker Assistance Act of 2002, enables owners nationwide to claim an additional 30 percent first-year depreciation for certain qualified property, including leasehold improvements. To be eligible, such property must have been purchased or under construction between Sept. 11, 2001 and Sept. 10, 2004.
The new bill, introduced in late March by Rep. Jerry Weller (R-Ill.) applies the depreciation rules to properties outside those dates, too. Normally, the value of a property is depreciated over 39 years.
Resulting tax savings under the new economic stimulus law will help owners lure tenants, proponents say.
“It will give owners an incentive to update properties, and it will certainly assist in bringing in tenants,” said Ivan J. Novick, president of Pittsburgh-based Oakmont Realty Partners and chairman of the ICSC Economic Issues Subcommittee. “We would have preferred provision for permanent leasehold depreciation, but this is certainly a very positive step.”
The law also extends a number of expired or expiring tax breaks, provides unemployment benefits for Americans for an additional 13 weeks and offers further benefits for areas of New York City damaged in the Sept. 11 attacks.
ICSC worked with other real estate trade groups to lobby Congress to pass the bill and had supported three previous House bills containing permanent 15-year leasehold-depreciation provisions.
“We are still very pleased that the enacted bill contains generous — albeit temporary — depreciation for leasehold improvements,” said Wayne Mehlman, director of economic issues in ICSC’s government relations division. “ICSC and other real estate organizations will be working over the next couple of years to get Congress to enact permanent leasehold improvement depreciation legislation.”
In New York City qualified leasehold improvements undertaken between Sept. 11, 2001 and Dec. 31, 2006 can be depreciated over five years. In addition, other qualified nonresidential real estate property and residential rental property built in the area of the attacks between Sept. 11, 2001 and Dec. 31, 2009 are eligible for a 30 percent bonus first-year depreciation.
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