On April 17, 2020, the IRS released Rev. Proc. 2020-25 outlining how to implement the Qualified Improvement Property (QIP) changes that were part of the CARES Act of 2020 using Form 3115, Change in Accounting Method. Section 6.03(4)(b), states that a taxpayer making a change 244 to correct QIP and changed related to depreciation recovery periods should file a single Form 3115 for all such changes and must enter the designated automatic accounting method change numbers on the appropriate line on the Form 3115.
KBKG has put together a sample Form 3115 template with attachments for the concurrent Designated Change Numbers (DCN) 244 and 7. This template is free and can be accessed in our Resource Library.
KBKG authored an earlier overview of the new procedures and provides a single change 244 & 245 template that can be found here.
KBKG Insight: Taxpayers should consider a limited scope cost segregation to separate QIP from non-QIP costs when improvements are not solely related to tenant interior spaces and exceed $1 million. Cost segregation also makes sense for states that do not conform to federal bonus depreciation.
QIP is defined as any improvement made by the taxpayer to an interior portion of a building that is nonresidential real property as long as the improvement is placed into service after the building was first placed into service by any taxpayer (IRC §168(k)(3)). Additionally, QIP specifically excludes expenditures for (1) the enlargement of a building, (2) elevators or escalators, or (3) the internal structural framework of a building.
Contact a KBKG specialist to discuss options on how to maximize tax deductions, generate losses, or the effects on credits calculated in prior years. Our team is available to discuss the new CARES Act and how it may impact your tax situation.
You can download our Qualified Improvements Quick Reference Chart for an easy-to-use resource reflecting these new changes for free, by joining our mailing list. Download will be available immediately following submission:
Access the Qualified Improvements Quick Reference Chart
About the Author
John W. Hanning, CCSP, MBA – Principal
John leads KBKG’s Southeast practice and is a Fixed Assets/Cost Segregation/Accounting Methods Principal in Atlanta, GA. Johns’ responsibilities include servicing capital intensive clients with value-added services relating to cost segregation, fixed asset reviews, repair & expense studies, and 263(a) compliance. » Full Bio
Lester Cook, CCSP – Principal
Lester has nearly 20 years of experience in the tax specialty service industry. He is a Principal and leads KBKG’s Fixed Asset Review Practice from our Chicago, IL office. Throughout his career, Lester has completed cost segregation analyses on thousands of properties ranging from office space leasehold improvements to multi-billion dollar industrial complexes. » Full Bio