I
106TH CONGRESS
1ST SESSION
H. R. 844
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
FEBRUARY 24, 1999
Mr. SHAW (for himself, Mr. THOMAS, Mr. LEWIS of Georgia, Mr. ENGLISH,
Mrs. THURMAN, Mr. SAM JOHNSON of Texas, Mr. FOLEY, Mr. WELLER,
and Mr. CANADY of Florida) introduced the following bill; which was re-
ferred 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.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. RECOVERY PERIOD FOR DEPRECIATION OF
CERTAIN LEASEHOLD IMPROVEMENTS.
(a) 10-YEAR
RECOVERY
PERIOD.—Subparagraph
(D) of section 168(e)(3) of the Internal Revenue Code of
1986 (relating to 10-year property) is amended by striking
‘‘and’’ at the end of clause (i), by striking the period at
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the end of clause (ii) and inserting ‘‘, and’’, and by adding
at the end the following new clause:
‘‘(iii) any qualified leasehold improve-
ment property.’’.
(b) QUALIFIED LEASEHOLD IMPROVEMENT PROP-
ERTY.—Subsection (e) of section 168 of such Code is
amended by adding at the end the following new para-
graph:
‘‘(6) QUALIFIED
LEASEHOLD
IMPROVEMENT
PROPERTY.—
‘‘(A) IN
GENERAL.—The term ‘qualified
leasehold improvement property’ means any im-
provement to an interior portion of a building
which is nonresidential real property if—
‘‘(i) such improvement is made under
or pursuant to a lease (as defined in sub-
section (h)(7))—
‘‘(I) by the lessee (or any subles-
see) of such portion, or
‘‘(II) by the lessor of such por-
tion,
‘‘(ii) such portion is to be occupied ex-
clusively by the lessee (or any sublessee) of
such portion, and
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‘‘(iii) such improvement is placed in
service more than 3 years after the date
the building was first placed in service.
‘‘(B) CERTAIN
IMPROVEMENTS
NOT
IN-
CLUDED.—Such term shall not include any im-
provement for which the expenditure is attrib-
utable to—
‘‘(i) the enlargement of the building,
‘‘(ii) any elevator or escalator,
‘‘(iii) any structural component bene-
fiting a common area, and
‘‘(iv) the internal structural frame-
work of the building.
‘‘(C) DEFINITIONS AND SPECIAL RULES.—
For purposes of this paragraph—
‘‘(i) COMMITMENT TO LEASE TREAT-
ED
AS
LEASE.—A commitment to enter
into a lease shall be treated as a lease, and
the parties to such commitment shall be
treated as lessor and lessee, respectively.
‘‘(ii) RELATED PERSONS.—A lease be-
tween related persons shall not be consid-
ered a lease. For purposes of the preceding
sentence, 
the 
term 
‘related 
persons’
means—
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‘‘(I) members of an affiliated
group (as defined in section 1504),
and
‘‘(II) persons having a relation-
ship described in subsection (b) of
section 267; except that, for purposes
of this clause, the phrase ‘80 percent
or more’ shall be substituted for the
phrase ‘more than 50 percent’ each
place it appears in such subsection.’’
(c) REQUIREMENT TO USE STRAIGHT LINE METH-
OD.—Paragraph (3) of section 168(b) of such Code is
amended by adding at the end the following new subpara-
graph:
‘‘(G) 
Qualified 
leasehold 
improvement
property described in subsection (e)(6).’’.
(d) ALTERNATIVE SYSTEM.—The table contained in
section 168(g)(3)(B) of such Code is amended by inserting
after the item relating to subparagraph (D)(ii) the follow-
ing new item:
‘‘(D)(iii) .................................................................................
10 ’’.
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply to qualified leasehold improvement
property placed in service after the date of the enactment
of this Act.
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