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104TH CONGRESS

1ST SESSION H. R. 1171

To amend the Internal Revenue Code of 1986 to provide a shorter recovery

period for the depreciation of certain leasehold improvements.

IN THE HOUSE OF REPRESENTATIVES

MARCH 8, 1995

Mr. SHAW (for himself, Mr. RANGEL, Mr. CRANE, Mrs. JOHNSON of Connecticut, Mr. THOMAS, Mr. HANCOCK, Mr. NEAL of Massachusetts, Mr. ENGLISH of Pennsylvania, Mr. SAM JOHNSON of Texas, and Mr. HERGER)

introduced the following bill; which was referred to the Committee on

Ways and Means

A BILL

To amend the Internal Revenue Code of 1986 to provide

a shorter recovery period for the depreciation of certain

leasehold improvements.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. RECOVERY PERIOD FOR DEPRECIATION OF

4 CERTAIN LEASEHOLD IMPROVEMENTS.

5 (a) IN GENERAL.—Subsection (c) of section 168 of

6 the Internal Revenue Code of 1986 (defining applicable

7 recovery period) is amended by adding at the end the fol8 lowing new paragraph:
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1 ‘‘(3) QUALIFIED LEASEHOLD IMPROVEMENT

2 PROPERTY.—

3 ‘‘(A) IN GENERAL.—In the case of quali4 fied leasehold improvement property, the appli5 cable recovery period shall be 10 years.

6 ‘‘(B) QUALIFIED LEASEHOLD IMPROVE7 MENT PROPERTY DEFINED.—For purposes of

8 this paragraph, the term ‘qualified leasehold

9 improvement property’ means any improvement

10 to an interior portion of a building which is

11 nonresidential real property if—

12 ‘‘(i) such improvement is made under

13 or pursuant to a lease (as defined in para14 graph (7) of subsection 168 (h))—

15 ‘‘(I) by the lessee (or any

16 sublessee) of such portion, or

17 ‘‘(II) by the lessor of such por18 tion,

19 ‘‘(ii) such portion is to be occupied ex20 clusively by the lessee (or any sublessee) of

21 such portion, and

22 ‘‘(iii) such improvement is placed in

23 service more than 3 years after the date

24 the building was first placed in service.
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1 ‘‘(C) CERTAIN IMPROVEMENTS NOT IN2 CLUDED.—Such term shall not include any im3 provement for which the expenditure is attrib4 utable to—

5 ‘‘(i) the enlargement of the building,

6 ‘‘(ii) any elevator or escalator,

7 ‘‘(iii) any structural component bene8 fiting a common area, and

9 ‘‘(iv) the internal structural frame10 work of the building.

11 ‘‘(D) DEFINITIONS AND SPECIAL RULES.—

12 For purposes of this paragraph—

13 ‘‘(i) COMMITMENT TO LEASE TREAT14 ED AS LEASE.—A commitment to enter

15 into a lease shall be treated as a lease, and

16 the parties to such commitment shall be

17 treated as lessor and lessee, respectively.

18 ‘‘(ii) RELATED PERSONS.—A lease be19 tween related persons shall not be consid20 ered a lease. For purposes of this subpara21 graph, related persons means members of

22 an affiliated group (as defined in section

23 1504), or persons having a relationship de24 scribed in subsection (b) of section 267 ex25 cept that, for purposes of this clause, the
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1 phrase ‘80 percent or more’ shall be sub2 stituted for the phrase ‘more than 50 per3 cent’ each place it appears in such sub4 section.

5 ‘‘(E) RECOVERY PERIOD ALSO USED FOR

6 MINIMUM TAX, ETC.—The recovery period de7 termined under this paragraph shall also apply

8 for purposes of subsection (g).’’

9 (b) CONFORMING AMENDMENTS.—

10 (1) Subsection (b) of section 168 of the Inter11 nal Revenue Code of 1986 (applying the straight

12 line method to certain property) is amended by add13 ing the following new subparagraph (F):

14 ‘‘(F) Qualified leasehold improvement

15 property.’’

16 (c) EFFECTIVE DATE.—The amendment made by

17 this section shall apply to qualified leasehold improvement

18 property placed in service after the date of the enactment

19 of this Act.

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