NAIOP Joins Letter Urging Speedy QIP Fix

A total of 283 groups including NAIOP are asking the Trump administration to swiftly address particular drafting errors that were made in the Tax Cuts and Jobs Act before it was signed into law last year. In a letter sent to Treasury Secretary Steven Mnuchin, the groups asked specifically about two provisions: those dealing with qualified improvement property (QIP) and net operating losses (NOL).

QIP is a central concern for NAIOP, as we strongly support a shorter depreciation schedule. “Should the law be left unchanged, a real estate firm investing $5 million to renovate its property would lose out on more than $100,000 each year in deductions, money that could be spent on hiring new staff, or reinvesting in the business,” wrote NAIOP Chairman Jim Neyer in an op-ed for the Cincinnati Enquirer. “Worse yet, companies might decide to hold off on these projects,” Neyer warned.

The group letter makes a similar point. “The delay in correcting these provisions has caused economic hardship for some retailers, restaurants, members of the real estate industry, and suppliers of building products, and is also delaying investments across the economy that impact the communities in which these companies are doing business,” it says.

QIP is defined as any improvement to an interior portion of a building which is nonresidential real property, as long as the improvement was placed in service after the date the building was first placed in service. The tax deduction is spread out across the asset’s usable lifespan, and that number of years is set in advance by the Internal Revenue Service.

When they passed the new tax law, lawmakers clearly intended to shorten the depreciation schedule for QIP. In fact, Republicans on the Senate Finance committee sent a letter to Secretary Mnuchin explaining that the current QIP language, which may force owners to take a longer depreciation schedule of some 39 years, was a typo introduced as the final law was being drafted under deadline pressure.

Lawmakers should pass a “technical corrections” bill to fix the mistakes. However, no legislative action is expected to happen until after the November elections at the earliest.