Other tax impediments to redevelopment include 39 year depreciation of leasehold improvements and the capitalization of demolition costs. We urge the immediate enactment of H.R. 844, Mr. Shaw's bill to change the depreciation treatment for leasehold improvements to 10 years. It is cosponsored by almost every member of the Ways and Means Committee and would more closely align the tax depreciation of the improvements with the economics of the lease transaction. This would help keep buildings modern and ease the pressure to develop new sites. Mr. Neal and Mr. English, the co-chairs of the Real Estate Caucus, have been particularly supportive of this bill.
Demolition can be an expensive cost component of a redevelopment project.
Similar to environmental remediation costs, demolition costs must be capitalized to the land and this unfavorable tax treatment is an impediment to redevelopment. We believe demolition costs for non-historic structures costs should, at a minimum, be added to the basis of the building and depreciated. Mrs. Johnson has been supportive in this area and we look forward to working with her and other Members of the Committee on this issue. In conclusion, we urge Congress to act to remove federal policies that are impediments to redevelopment. Brownfields remediation and redevelopment will particularly benefit if the dual impediments of Superfund liability and capitalized cost treatment are removed.