Commercial Property Owners Among Winners in New Tax Law

President Bush has approved $136 billion in tax breaks for businesses, commercial property owners, farmers and others in a dramatic rewrite of corporate tax law.

The bill, which Bush signed into law Friday, allows


Click Here

commercial property owners to depreciate improvements they make for tenants over 15 years rather than 39 years.

An industry group called the Real Estate Roundtable gave the Wall Street Journal the following example to demonstrate the tax savings: The scenario involves a lease of a 10,000-square-foot office with a rent of $35 per square foot with $50 per square foot allocated to the tenant for leasehold improvements. Under the current 39-year depreciation schedule, the property owner, with a 35 percent tax rate, would be allowed to claim a depreciation deduction of $12,821 each year. The tax savings would be $4,487. Under the 15-year schedule, the deduction would be $33,333 each year, resulting in $11,667 in tax savings.

Supporters of the change say that the new 15-year schedule is more realistic, since tenant leases rarely last 39 years. "In fact, a lot of leases are shorter than 15 years, but [this] is going in the right direction,” said CPA Julie A. Welch, director of the tax department at Meara, King & Co., a Kansas City, Mo., auditing and accounting firm.

The temporary tax break expires Jan. 1, 2006.

The original idea behind the legislation was to repeal a $5 billion yearly tax break for American exporters that was ruled illegal by the Geneva-based World Trade Organization, the Associated Press reported. The tax break resulted in heavy tariffs on more than 1,600 American manufactured products and farm goods exported to Europe.

Other winners in the new corporate tax law include tobacco farmers. The legislation includes $10 billion in assistance. In addition, manufacturers, including factories, large farms, oil and gas producers, engineering, construction and architectural firms, would get $76.5 billion in tax relief.


Already a member? log in here.

Editor's Choice

Upcoming CPE Webinars

Dec 3The materials discuss the concepts and principles in the AICPA’s new special purpose framework.
Dec 8Kristen Rampe will cover how to diffuse the tension in challenging situations in this one-hour webinar.
Dec 9A key component to improving your firm’s workflow efficiency while enhancing your profitability at the same time is how you leverage emerging technologies.
Dec 16Kristen Rampe will give tips on how to bring confidence into the room and build a valuable network.