Legislative Wins for the Buildings Industry
Commercial facilities benefit from huge advances in energy deductions and tenant depreciation
BY KAREN W. PENAFIEL
In recent years Congress has earned a reputation for par- tisan bickering and an inability to pass legislation — but
2015 was different. In fact, 2015 was great for the commercial
real estate industry, with major legislative victories at its
beginning and end.
Last January, legislation to extend the Terrorism Risk
Insurance Act (TRIA) passed both the House and the Senate.
It was signed into law by President Obama on Jan. 12, 2015.
In addition to extending the program for an additional six
increases the loss threshold that triggers
federal assistance from $100 million to
$200 million. The extension of TRIA is a tremendous win for the commercial real estate
Last April, the real estate industry scored
another victory with the passage of legislation to create a “Tenant Star” program to
be developed and implemented by the DOE
and EPA. The goals are to create resources
and research on energy efficiency in tenant
spaces. It will establish best practices for
commercial tenants and launch an energy
benchmarking program for leased spaces.
The industry’s biggest victory came in
the last-minute scurry before Congress
adjourned for the year. On Dec. 18, it passed
the Protecting Americans from Tax Hikes
(PATH) Act of 2015. Included in PATH are
1) a permanent extension of the 15-year depreciation on
qualified leasehold improvements, which had been BOMA
International’s top tax priority; 2) fixes to the Foreign Investment in Real Property Tax Act (FIRPTA); and 3) a two-year
extension of the energy efficiency deduction for commercial
For the past decade, BOMA International has lobbied Con-
gress on behalf of commercial real estate to allow the indus-
try to depreciate tenant improvements over 15 years instead
of 39, a timeline that more closely aligns with the life of an
average lease. Until now, Congress had opted to do this in
one- or two-year increments, but lawmakers had never taken
up legislation to make it permanent. This change will, for the
first time, give commercial building owners confidence to
invest capital knowing they can depreciate tenant improve-
ments over 15 years.
The adjustments made to FIRPTA also will encourage
more investment in our country’s real estate. The new law
increases the withholding threshold for foreign investors to
hold an interest in U.S. real estate without triggering unnecessary tax liability from 5 to 10%, and it exempts foreign pension funds from the tax penalty.
Extension of the Energy Efficiency Deduction
The two-year extension of the deduction for energy efficiency improvements in commercial real estate, also known
as the 179D deduction, is a victory for building owners who
are making efficiency investments. As this tax deduction had
already expired on Jan. 1, 2014, the two-year extension is retroactive and will again expire on Dec. 31, 2016.
In 2016, BOMA International will continue to aggressively
promote the commercial real estate industry’s legislative
agenda. Now that Congress has passed the extension of the
179D tax deduction for energy efficiency retrofits, we will
work with Congress to improve and enhance the deduction
to spur innovation. Also topping our agenda is legislation to
amend the Americans with Disabilities Act (ADA) to discourage nuisance lawsuits for violations. The legislation would
require anyone who wants to move forward with a lawsuit to
first notify the building owner of the violation and provide an
opportunity to fix the violation. This will help ensure that our
buildings are accessible and thus meet the goals of the ADA
without providing an economic incentive to opportunistic
lawyers who merely want a quick settlement.
With the presidential elections already in full swing, we do
not expect to see any movement on comprehensive tax reform
in 2016. However, to gear up for 2017, BOMA International will
continue working to educate Congress on real estate tax issues
that have been floated over the past few years, including carried interest and “like-kind” (Section 1031) exchanges. B
Karen Penafiel is BOMA International’s Vice
President of Advocacy, Codes and Standards.
She can be reached at firstname.lastname@example.org.
For more information about BOMA International’s advocacy efforts, please visit
the passing of
the Protecting Americans
from Tax Hikes
(PATH) Act of