Source: Senate Finance Committee ltr dated 8/16/18 to IRS

Fourteen members of the Senate Finance Committee have written to the Treasury / IRS stating that they will introduce technical corrections legislation dealing with three areas of the Tax Cuts and Jobs Act of 2017 (TCJA) that they feel the IRS has misinterpreted:

1. Qualified leasehold/restaurant/retail improvements: The letter stated that it was Congress’ intent that such property should qualify for bonus depreciation (whereas at this moment it doesn’t under current TCJA);
2. Net operating losses: Changing application of the new law to years beginning after 12/31/2017;
3. Sexual harassment/abuse law suit: Allow attorney fees as a deduction for settlements arising out of such actions.

ALL OF THE ABOVE ARE NOT YET LAW.  If/when Congress passes the technical corrections act dealing with the above subjects, the IRS will have a clear picture of Congressional intent as it applies to these areas of the TCJA.

Ref: IRS Reg-104397-18 (8/8/18)

A simplified summary of items allowed for 100% federal bonus depreciation currently through 12/31/2026:

• New personal property used for business (special rules for vehicles) with a MACRS recovery period of 20 years or less.
• Used personal property used for business UNLESS acquired from a related party (or used by the control person in another business previously)
• Computer software
• Qualified film, television or live production allowable under Code Sec 181

NOT allowed after 1/1/2018 is Qualified [leasehold] Improvement Property (QIP).

HOWEVER, according to the IRS FS-2018-9, a Section 179 expense election can be made for QIP (2018 limit of $1 million subject to phaseouts) UNLESS the improvement involves:

• the enlargement of a building
• any elevator or escalator
• the internal structural framework of the building
• roofs, HVAC, fire protection systems, alarm systems and security systems

These are very detailed regulations.  Please call for discussion if you feel that they apply to you.