From BOMA International (Builders Owners Management Association

President Signs Stimulus Legislation Into Law; Includes Benefits to Commercial Real Estate

President Obama signed into law the recently passed stimulus bill, H.R. 1, The American Recovery and Reinvestment Act of 2009. Last week, the conference report was approved by both the House and Senate, largely along party lines. In addition to providing grants to the states and funding a variety of infrastructure investments, the new law contains three provisions that will have varying degrees of impact on the commercial real estate industry: bonus depreciation, cancellation of debt (COD) income and Net Operating Loss carryback (NOL) relief.

The bonus depreciation is an extension of a provision enacted in 2008 that allows for immediate writ;off of fifty percent of the cost of depreciable property, including qualified leasehold improvements, placed into service in 2008. This temporary benefit will be applied to capital expenditures incurred in 2009 as well.

The COD provision enacted provides significant tax relief for businesses that reacquire, satisfy or otherwise discharge debt obligations at a discount in 2009 and 2010. The new law allows companies to defer any tax on 2009 and 2010 COD income until 2014. It then taxes that COD income ratably over the following five years (201-2018). Before this change, COD income was recognized the same year it was claimed and based on the total amount of the discount.

Finally, the NOL carryback provision allows companies to receive a tax refund by using current losses to offset taxes paid in prior years, but only for companies with gross annual receipts of less than $15 million in revenues. Current law only allows businesses to get refunds of taxes paid within two years. The initial proposal did not have the gross receipts limitation, which was unfortunately inserted during Hous-Senate conference negotiations.