On Thursday of last week, the Internal Revenue Service (IRS) issued much-needed guidance to ensure that more commercial real estate businesses could access the favorable bonus depreciation provisions of the One Big Beautiful Bill Act (OBBBA). NAIOP and the real estate industry had asked for action to clarify that certain real estate businesses would not be barred from OBBBA’s 100% bonus depreciation provisions because of prior elections made under the Tax Cuts and Jobs Act of 2017 (TCJA). Essentially, a real estate trade or business that had made an election involving TCJA’s limitations on deducting interest paid on debt could then not avail itself of the bonus depreciation allowance, which under the prior law was declining in value and was due to expire. OBBBA reversed this, restoring 100% bonus depreciation. Without IRS action, however, businesses having made a prior election to forego bonus depreciation would be barred from benefitting from OBBBA’s restored provisions.

NAIOP President and CEO Marc Selvitelli sent a letter to Treasury Secretary Scott Bessent urging the Treasury and IRS to expedite action so that real estate businesses filing their tax returns could take 100% bonus depreciation. As Selvitelli stated in the letter, not allowing businesses to access the more favorable bonus depreciation provisions “would be an unintended result, as the restoration of 100 percent expensing for capital expenditures, including property improvements, is one of the most meaningful and potentially impactful provisions of OBBBA.” NAIOP members also weighed in with House Ways and Means Committee staff on the issue. The subsequently issued IRS Revenue Procedure 2026-17 fixes the problem by providing that real estate businesses can retroactively withdraw an election for taxable years 2022, 2023 or 2024, ensuring that NAIOP members and others in the commercial real estate industry would benefit from the revised bonus depreciation provisions of OBBBA.