The Coronavirus Aid, Relief, and Economic Security Act ("CARES Act")

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) now allows taxpayers to treat Qualified Improvement Property ("QIP") as 15-year property and retroactively eligible for 100% bonus depreciation. This pertains to REITs who are looking to manage their dividend and taxpayers, which may result in significant taxable income reductions and impact on dividend payout requirements as well as taxpayers looking to minimize its taxable income.

Taxpayers and REITs looking to minimize the tax liabilities and dividend may want to consider a review of their tenant improvements, building improvements or other building construction costs made since 2018 as certain expenditures may qualify for as QIP. This may result in significant taxable income reductions or dividend payout requirements.

As such, companies may also want to consider “look-back” cost segregation analyses on any acquisitions or constructed buildings where no cost segregation had previously been performed or a current cost segregation analysis. A look back analysis will allow taxpayers and REITs to claim depreciation deductions that should have been claimed in previous years since their buildings were originally placed in service.

Read more on the CARES Act and Cost Segregation for Taxpayers

Read more on the CARES Act and Cost Segregation for REITs

Matthew Jaimes is a senior director in the Duff & Phelps Real Estate Advisory Group (REAG) who can advise you if improvements qualify as QIP, based on tenant and building improvements and other building construction costs made since 2018.