ATR Leads Coalition Supporting Accelerated Depreciation for All Structures

Today, Americans for Tax Reform led a coalition letter in support of the Renewing Investment in American Workers and Supply Chains Act, which would allow accelerated depreciation for all structures. This legislation was introduced by Congresswoman Jackie Walorski (R-Ind.) and Republican Study Committee Chairman Jim Banks (R-Ind.).

Currently, both nonresidential and residential property are subject to extremely long recovery periods, 39 years and 27.5 years respectively. This legislation would reduce the depreciation schedule for all non-residential and residential property to 20 years. The bill would also allow companies to apply a neutral cost recovery adjustment to deductions to account for inflation and the time value of money.

This pro-growth policy will make the tax code more efficient and will help grow the economy as we continue to rebuild from the damage cause by the COVID-19 pandemic. ATR’s letter was signed by X other organizations.

The letter can be found here or below:

March 24^th, 2022

Dear Member of Congress: 

We write in support of the Renewing Investment in American Workers and Supply Chains Act, legislation to allow accelerated depreciation for all structures, introduced by Congresswoman Jackie Walorski (R-Ind.) and Republican Study Committee Chairman Jim Banks (R-Ind.). 

This legislation would reduce the depreciation schedule for all non-residential and residential property to 20 years. Currently, both nonresidential and residential property are subject to extremely long recovery periods. The legislation would also allow companies to apply a neutral cost recovery adjustment to deductions to account for inflation and the time value of money.

Nonresidential structures such as an office building, store, or warehouse, has a recovery period of 39 years. Residential rental property, where at least 80 percent of its rental income is from dwelling units, has a recovery period of 27.5 years.  

Under the tax code, businesses can deduct or “depreciate” the cost of many investments immediately, a policy known as full business expensing. The 2017 Tax Cuts and Jobs Act implemented full expensing for assets with 20 years or less of depreciable life through 2022. The provision begins phasing out through the end of 2026. 

This is the right tax treatment – the tax code should allow businesses to deduct assets immediately. However, because structures had a cost recovery period above 20 years, they were not included in the TCJA full expensing provision.

Accelerating the depreciation of structures and applying an adjustment for inflation and the time value of money would move the tax code closer to a neutral cost recovery system. Different business expenses should not receive such disparate treatment in the tax code. There is no reason a business should be able to deduct the costs of its utilities, rent, insurance, office supplies, etc. but be required to deduct the cost of their property over decades.

This bill will grow the economy and promote investment in America more than any of the central planning schemes currently being considered in Congress. Allowing businesses to deduct more of the cost of their property each year increases their capital stock, enabling them to deploy these resources towards re-investment, higher wages, and new jobs. In fact, according to the Tax Foundation, moving to a 20-year depreciation schedule for structures would increase long-term economic output by 1.2 percent, capital stock by 2.3 percent, increase wages by 1.0 percent and create the equivalent of 231,000 full time jobs.

We urge you to cosponsor and support Reps. Walorski’s and Banks’ bill to reduce and equalize the depreciation period for nonresidential real property and residential rental property. This pro-growth policy will make the tax code more efficient and will help grow the economy as we continue to rebuild from the damage cause by the COVID-19 pandemic.

Sincerely,