The Protecting Americans from Tax Hikes (PATH) Act of 2015 extends and modifies several key provisions, opening up many tax planning opportunities that can help restaurants and retail businesses get the most out of their capital expenditures. The Act extends bonus depreciation, creates a new type of bonus-eligible property, and makes the 15-year recovery period for the three types of Qualified Real Property permanent.
Restaurant and retail examples
A grocery store installs new light fixtures throughout the entire interior portion of the building which is six years old. This property would fall under the QRIP category, as well as QIP, and would be depreciated over 15 years, bonus eligible.
A car dealership puts up a nonstructural wall and a door to create an office space inside a building which is four years old. The wall and door would fall under the QRIP category, as well as QIP, and would be depreciated over 15-years, bonus eligible.
A new restaurant is built and first placed in service when the restaurant opens in August 2016. This property only falls under the QRP category and would be depreciated over 15 years, not bonus eligible. This property does not qualify for bonus under QIP as the property has to be placed in service after the building is first placed in service and any structural or exterior work would also be excluded.
A restaurant underwent a big interior and exterior remodel after the building was three years old. The entire project would fall under QRP and can be depreciated over 15 years, but only the nonstructural interior work is bonus eligible.
A new convenience store was built and first placed in service in February of 2016. The landlord and the tenant of the building are related parties. In November of 2016 a new light was added to the back office. This property does not fall under QLHI, QRIP or QRP since there is a related-party lease and building is not three years old. It does fall under the QIP definition as it is an interior improvement and was placed in service after the building was first placed in service. The property would be depreciated over 39 years, bonus eligible.
For more information on this topic, or to learn how Baker Tilly tax specialists can help, contact our team.
The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.