On Sept. 4, Nareit joined other national real estate organizations in a letter to the chairmen and ranking members of the House Ways and Means and Senate Finance Committees, requesting that “Congress correct a drafting oversight in the Tax Cuts and Jobs Act (TCJA) that requires certain multifamily buildings to be depreciated over 40 years as opposed to the congressionally intended 30 years.”
Under the TCJA, multifamily property owners may elect out of limitations on interest deductibility so long as they depreciate new property under the Alternative Depreciation System (ADS) for taxable income purposes. Properties are already depreciated under ADS for purposes of calculating earnings and profits. The TCJA also reduced the ADS recovery period for multifamily property from 40 years to 30 years.
Due to a drafting oversight, the law subjects multifamily properties placed in service prior to 2018 to the old 40-year period rather than the intended new 30-year period for those companies that elect out of the interest deductibility limitations. The letter urges enactment of legislation clarifying that such property may be depreciated over 30 years for electing companies.
(Contact: Dara Bernstein at email@example.com)