Tax Reconciliation Bill Begins Negotiations in House, Senate

March 7, 2006
15-year leasehold improvement depreciation and deductible environmental clean-up included

Tax reconciliation legislation that will ultimately benefit real estate is now in final negotiations between the House and Senate. Included most importantly is legislation that would for the short term reinstate the 15-year leasehold improvement depreciation period and allow environmental cleanup costs to be deducted, including, for the first time, costs incurred to remediate petroleum contamination.

The National Association of Industrial and Office Properties (NAIOP) has been a strong proponent of reducing leasehold improvement depreciation permanently to 15 years, as it better reflects the life-cycle of a property. The brownfields expensing provision, also backed by NAIOP, allows immediate cost recovery - instead of requiring owners to wait until a property is sold - which counterbalances higher costs and risks associated with redeveloping contaminated sites.

Among the key differences between the House and Senate versions is the language in the House bill that would extend the 15-percent capital gains and dividends rates (from 2008 until 2010); the Senate bill has no such language.

NAIOP believes that both provisions should be made permanent and will continue to advocate on behalf of the industry.

This information was reprinted with permission from NAIOP. For further information contact Reba Raffaelli, vice president for federal affairs, NAIOP, by e-mailing (
[email protected]) or calling (703) 904-7100, ext. 110. To find out more about NAIOP, visit (

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