Obama Signs Tax-Cut-and-Stimulus Package into Law; Measure Includes Real Estate-Backed Provisions on Leasehold Improvement, Brownfields, Bonus Depreciation
With just 14 days before the Bush tax cuts were due to expire, President Obama this afternoon signed the $859 billion tax-cut-and-stimulus package that cleared the House late last night and the Senate earlier in the week. Before the final House vote of 277-148 clearing the measure to go to the White House, Democrats sought unsuccessfully to amend the package with less generous 2009 estate tax rates (45 percent rate/$3.5 million per person exemption).
President Obama this afternoon signed the $859 billion tax-cut-and-stimulus package into law.
The tax compromise, negotiated last week by Obama and Senate Republicans, will:
• extend the current tax law on income, capital gains and dividends for two years (until 2012);
• reinstate and extend a number of business tax breaks for one year (through 2011), including real estate-backed provisions to provide for 15-year depreciation of leasehold improvements and same-year expensing of brownfields cleanup costs
• provide immediate expensing of 100 percent of the costs of business assets whose depreciable life is less than 20 years (eligible assets include leasehold improvements); the provision applies to businesses of all sizes and to costs incurred after Sept. 8, 2010 and through Dec. 31, 2011
• allow 50 percent of the costs of similar investments made in 2012 to be expensed, with the balance of costs recovered via depreciation
• reduce Social Security payroll taxes by 2 percent for workers in 2011
• protect millions of Americans from getting hit by the alternative minimum tax (AMT)
• extend unemployment benefits for one year
As reported in GlobeSt.com, the tax characterization of carried interest is not changed by the legislation. “Job creation is what the economy needs and, as we have been saying for some time, the proposed carried interest tax hike was a job killer,” Real Estate Roundtable President and CEO Jeff DeBoer told GlobeSt.com. “We are pleased it has been set aside.”
Real Estate Roundtable President and CEO Jeff DeBoer
Looming questions about the tax code, the specter of considerable tax increases, and weak economic recovery have been compounding businesses’ reluctance to invest in new projects or expand their payrolls. Since jobs are key to driving business demand for commercial space — and lifting net operating income (NOI) and property values from their currently depressed levels — The Roundtable welcomes the tax package and is hopeful it will help spark more robust private-sector job creation.
“This breakthrough on taxes couldn’t be more welcome,” said DeBoer. “By offering some predictability on tax policy — albeit temporary — this new law will allow businesses to better calculate their future costs, giving many of them more confidence to proceed with hiring and expansion plans. By averting an across-the-board increase on all taxpayers — and even putting more money in their pockets with the payroll tax holiday — the legislation should also help prevent a new contraction in consumer spending,” he continued.
“Together with policies to help bring new equity into commercial real estate markets, an improved jobs picture will spur more transactions, stabilize commercial estate asset values more quickly, and allow our industry to resume its historically positive contributions to the national economy,” DeBoer concluded.
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