Did you know that a cellular enhancement repeater system installed by Illuminati Labs is considered a qualified improvement by the IRS and is now eligible for 100% bonus expensing under the new Coronavirus Aid, Relief and Economic Security (CARES) Act provisions?
It’s true! As you are probably aware, the CARES Act is an unprecedented spending and stimulus bill designed to address the economic devastation of the COVID-19 pandemic.
BOMA (Building Owners and Managers Association) International recently released their analysis of the CARES Act provisions that are relevant to commercial real estate owners and tenants and the Qualified Improvement Property stipulation is chief among them.
The IRS says “This new law increases the bonus depreciation percentage from 50 percent to 100 percent for qualified property acquired and placed in service after Sept. 27, 2017, and before Jan. 1, 2023.”
In their guide, BOMA International explained that the CARES Act fixes the so-called “retail glitch,” the qualified improvement property (QIP) error from the 2017 TCJA tax bill. The fix allows BOMA members, as well as restaurant and retail to fully expense tenant improvements. Meaning that many taxpayers may obtain tax refunds related to expenditures for renovation projects completed in the last few years.
This also means that going forward, expenditures for qualified improvements -- such as adding a cellular repeater system to provide or enhance cell coverage in your building -- may be eligible for 100% first-year bonus depreciation.
Here’s a little background and clarification from Baker Tilly, a leading advisory, tax and assurance firm:
“Qualified improvement property” means any improvement made by the taxpayer to an interior portion of a building which is nonresidential [commercial] real property, if such improvement is placed in service after the date such building was first placed in service.
In-building cell phone repeater systems are just such an improvement, providing vital connectivity to tenants in commercial buildings of all types.
The Retail Glitch
Due to a drafting error in the TCJA, any QIP placed in service after Dec. 31, 2017, was not eligible for bonus depreciation — this was known as the “retail glitch.” Congress intended for QIP to be bonus-eligible; however, the TCJA did not specifically include a 15-year recovery period for QIP. Therefore, after the tax reform dust settled, QIP was nonresidential real property with a recovery period of 39 years, not eligible for bonus.
CARES Act Technical Correction
All of this changed with the passage of the CARES Act, which amended the Internal Revenue Code (IRC) to define QIP as 15-year property. The Act also updated the alternative depreciation system (ADS) recovery period for QIP to 20 years. Finally, the Act updated the definition of QIP to include any improvement “made by the taxpayer.” These changes are retroactive to 2018 — i.e., to the passage of TCJA.
What to Do Now
Talk to your tax expert today to find out how you can take advantage of the temporary bonus depreciation to get the cell coverage your building needs. Then call Illuminati Labs to get the ‘perfect-fit’ cellular repeater system for your building
Download full BOMA International Advocacy guide