Thanks to BOMA International’s advocacy efforts, the end of 2019 saw the significant advancement of priority legislative items, including the Terrorism Risk Insurance Act (TRIA), qualified improvement property (QIP) and the Energy-Efficient Tax Deduction for Commercial Buildings, commonly referred to as 179D. Despite having a Congress known for delaying even the most bipartisan-friendly bills, 2019 shaped up to be a banner year for BOMA’s advocacy goals.
RENEWING TERRORISM RISK INSURANCE
BOMA, working in concert with the Coalition to Insure Against Terrorism (CIAT), helped fast track legislation to extend TRIA—a program that creates a federal backstop for insurance claims related to acts of terrorism. Without congressional action, the program would expire at the end of 2020.
U.S. House Committee on Financial Services Chairwoman Maxine Waters (D-Calif.) introduced legislation to extend TRIA for an additional seven years—an entire calendar year before the program was scheduled to sunset. BOMA International’s advocacy efforts created enough support and momentum to pass the bill unanimously out of committee, followed by a quick, decisive vote on the House floor, which advanced the bill to the Senate.
A few weeks later, the U.S. Senate Committee on Banking, Housing and Urban Affairs also unanimously voted to move the bill forward. In mid-December, the full Senate chamber showed its resounding support for this commonsense program by passing it 98-1. The bill is expected to be signed by President Trump and the program will continue uninterrupted through 2027, providing BOMA members peace of mind and the ability to acquire necessary coverage for financing projects.
While TRIA moved through the machinery of Capitol Hill faster than expected, QIP—formerly referred to as leasehold depreciation—is a victory from the trenches. The issue arose in 2017, when Congress passed the Tax Cuts and Jobs Act, which included specific provisions culminating in what was then considered the largest tax win for commercial real estate in decades.
However, a drafting error in the final bill has created new problems for the industry. The legislation neglects to specify a depreciation period, thus reverting these property types to 39-year depreciation periods, rather than the intended 15-year period. More than doubling the depreciation period significantly reduces the amount that interior improvements can be deducted come tax time, and therefore has the domino effect of cutting dramatically back on investment. Longer leasehold depreciation also means that property owners will have fewer interior improvement dollars and, in turn, have less work for building tradespeople.
Lawmakers took two painstaking years to address this critical error. In March 2019, after a year of educating and lobbying, standalone legislation was introduced and garnered enormous bipartisan support throughout the summer and fall. Unfortunately, the issue was used as a bargaining chip and the negotiations to include it in a yearend deal fizzled. BOMA will return to the halls of Congress in 2020 to renew our push to fix this error.
Energy efficiency legislation also garnered considerable attention from Congress in 2019. The only tax incentive for commercial buildings to replace equipment with more energy-efficient products, 179D had expired at the beginning of 2017.
This provision was among a group of energy provisions that are frequently bundled together called extenders. Despite sweeping tax legislation in late 2017, many of these extenders were left on the sidelines. In mid-2019, Congress took the first step in correcting this oversight and ensured that 179D was again packaged together with other mustpass legislation. The Senate Committee on Finance took a bolder step and released a bipartisan report stating that 179D should be enacted permanently, setting the stage for an extension and possibly more. In late December, a package renewing these extenders through 2020 (and retroactive to 2018) was passed, delivering a huge victory to energy efficiency and environmental stewardship.
After an ambitious year with many legislative goals, BOMA’s advocacy efforts bore fruit in 2019. As we pause to reflect on another successful year, BOMA’s advocacy team is poised to hit the ground running in 2020 on even more industry-related issues, such as fire sprinkler incentives and flood insurance reform, while continuing efforts to fix QIP and make 179D available to more buildings and a permanent part of the tax code.
This article was originally published in the January/February 2020 issue of BOMA Magazine.