Under current law, the cost of making improvements to leased space may be recovered over 15 years, according to the National Association of REALTORS®. This rule will expire as of January 1, 2010, however, unless Congress acts to extend it. If Congress were to fail to extend it, the cost recovery period would revert to 39 years, with the improvements being treated as part of the cost of the underlying real property.
The House of Representatives has passed HR 4213, a bill that extends this and dozens of other expiring provisions on a mostly party-line vote of 241 - 186. The bill is "paid for" by changing the tax treatment of real estate partnership carried interests from capital gains rates (currently 15%) to ordinary income treatment (as high as 39.6%). It is not known when or if the Senate will take up HR 4213 before the new year.
