My proposal here is to give highly-charged accelerated tax depreciation for all Commercial Building Upgrades and all new Commercial Buildings built in either the rest of 2011 or in all of 2012.
And my proposal will do it wisely without a CBO scored cost to the US Government over either the next 10 years, or frankly forever.
Presently, for US federal income tax purposes, real property tax deprecation on both new buildings and on remodelings of existing buildings is spread over many years, much longer than the ten-year CBO scoring period.
My proposal here is to allow businesses of all sizes that make commercial building remodelings or build new commercial buildings in the remainder of 2011, or in all of 2012, to get first-year tax expensing of the entire first 9 years of tax depreciation, which is allowed presently under the tax rules, on these type of building expenditures.
Then, the tax basis of the building investment made gets reduced for this highly accelerated first-year tax depreciation taken.
Thus, there would be no tax depreciation deductions allowed on this building improvement in the following 8 years.
And then, all tax depreciation taken after the first 9 years under present tax law, would be dramatically accelerated in some fashion, such as by cutting the remaining tax life in half, and thus doubling the previous annual tax depreciation starting in Year 10.
This highly incentivized scheme doesn’t change total real property tax depreciation, it just accelerates it dramatically from Years 2 through 9 to Year 1. And it also accelerates it starting in Year 10.
Because you are just moving total tax depreciation around among years, there shouldn’t be any long-term CBO scoring cost to the US government for this initiative.
And then to really help small and medium-sized businesses, as well as larger business in a federal income tax loss situation, particularly those in the Rust Belt, I would also let them choose a first-year tax equivalent refundable 35% investment tax credit, in lieu of the first-year highly accelerated real property tax depreciation resulting from this initiative.
And a company choosing this 35% investment tax credit option will not be allowed any tax depreciation deduction in the first 9 years. And then after reducing the tax basis of this building investment by the appropriately equivalent pretax amount, it would start tax depreciation in the 10th Year, on a very accelerated basis.
In addition, these Commercial Building Remodelings and new Building expenditures would be among those allowed as eligible property additions in my Explosive Jobs & Investment Tax Credit (EJ&ITC) combination proposal I previously offered in a recent earlier post.
