Page 23 - BusinessWest July 6, 2020
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More Relief from the CARES Act
Measure Brings Technical Correction for QIP, Other Benefits
OBy Lisa White
n March 27, the Coronavirus Aid, Relief,
and Economic Security (CARES) Act
was signed into law. Since its inception, much of the focus has been on the establish- ment of additional funding sources, such as the Paycheck Protection Program (PPP), or
on the creation of new tax credits, such as the Employee Retention Credit.
Technical Correction for Qualified Improvement Property
The Protecting Americans from Tax Hikes (PATH) Act of 2015 created a new category of asset called ‘qualified improvement property’ or QIP. This term referred to any improvement to an interior portion of non-residential real prop- erty, but excluded expenditures for elevators or
gible for bonus depreciation.
Not only did the CARES Act include the tech-
nical correction necessary for QIP to have its originally intended 15-year cost-recovery period, but the correction was directed to apply retroac- tively to all eligible assets placed in service after Dec. 31, 2017.
Then, in mid-April, the IRS provided guid- ance on how to capture this additional benefit from the change in the depreciable life and
the possible eligibility for bonus depreciation. Primarily, the two methods are to either file amended returns for the impacted year(s) or to file a Change in Accounting Method (Form 3115), which allows a ‘catch-up’ for the differences in the recovery periods and applicable depreciation methods.
Here’s an example: A business holds com- mercial rental property and operates on a Dec. 31 year-end. On July 15, 2018, the business incurred expenses of $150,000 in costs that meet the QIP definition. Assume Section 179 expense was not taken. Due to the technical error in the law, only $1,763 of depreciation expense was allowed in 2018, and $3,846 of depreciation expense would be allowed in 2019. With the technical correc- tion, bonus depreciation can now be taken on the entire amount of the qualified improvement prop- erty even though it was placed in service in 2018:
 “With proper planning and timely tax-advisor consultation, realizing additional relief during these unprec- edented times can be achieved.”
escalators, enlargements, and interior structural compo- nents. Although this category of asset technically had a 39-year cost-recovery period, it was specifically identified as being eligible for bonus depreciation.
When the Tax Cuts and Jobs Act (TCJA) was signed into law at the end of 2017, the intention was to assign a shorter, 15-year recovery life
    However, the act also made some significant revisions to existing tax law to provide additional relief to affected businesses. This article takes a closer look at two of these provisions and delves into how the related benefits associated with the changes might be derived.
to qualified improvement property, thus ensur- ing its eligibility for the enhanced 100% bonus depreciation provision also included in the TCJA. Unfortunately, the necessary wording was not included in the final bill, resulting in qualified improvement property retaining its 39-year cost- recovery period, but excluding it from being eli-
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