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Federal tax package now law.

President Bush in May signed the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTA), tax legislation designed to provide tax cuts to individuals and to businesses as an incentive for greater investment and economic activity. Some JGTA provisions directly affecting commercial real estate include:

* Capital gains tax rate reduction from 20 percent to 15 percent. REIT capital gains eligible for the reduced rate are capital gains on the sale of REIT stock and REIT capital gains distributions. When the provision expires, capital gains rates will revert to 20 percent.

* Additional bonus depreciation--leasehold improvements. JGTA increases the percentages of leasehold improvement costs that may be deducted from 30 percent to 50 percent, plus 1/39th of the remaining amount of the investment. When the bonus rules expire, the depreciable life for leasehold improvements will remain at 39 years.

* Increased expensing for small business. JGTA increases the amount a small business may deduct in the year of purchase from $25,000 to $100,000. The new provision also delays the phase-out until the investment reaches $400,000, rather than the previous level of $200,000. The eligible amount will revert to $25,000 when the provision expires.

* Tax on dividends. All dividend income will be taxed at 15 percent, rather than the previous practice of including it in adjusted gross income and taxing at ordinary rates. REIT distributions eligible for this lower rate are REIT dividends attributable to dividends received by the REIT from non-REIT corporations such as taxable REIT subsidiaries and REIT dividends attributable to income that was subject to tax by the REIT at the corporate level.
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Title Annotation:impact on commerical real estate; Jobs and Growth Tax Relief Reconciliation Act of 2003; in session
Author:Druckman, Amanda
Publication:Journal of Property Management
Article Type:Brief Article
Geographic Code:1USA
Date:Sep 1, 2003
Words:269
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