The Protecting Americans from Tax Hikes Act (PATH) passed by Congress and signed on December 18, 2015, made several changes that will impact landlords and tenants of commercial property. One significant change is it expanded the definition of “qualified property” eligible for bonus depreciation by adding a new category for “qualified improvement property”. The term qualified improvement property means any improvement to an interior portion of a building which is nonresidential real property if such improvement is placed in service after the date such building was first placed in service, excluding 1) enlargements, 2) elevators and escalators, and 3) internal structural framework. The improvements do not need to be made pursuant to a lease. Qualified improvement property is still considered improvements to commercial real property thus the depreciable life is 39 years, but in the year placed in service these improvements are now eligible for bonus depreciation.
There are upcoming changes to overtime regulations as reported by the Fair Labor Standards Act (FLSA), effective December 1, 2016, which update the rules for determining whether salaried employees are subject to or exempt from the FLSA’s overtime pay protections. These regulations apply to most employers (referred to as covered employers), including employers with gross sales of $500,000 or more. For not for profit organizations, gross sales refer to activities with a business purpose. Employers with annual gross sales under $500,000 may still have covered employees subject to the new overtime rules if those employees are individually engaged in interstate commerce. The definition of interstate commerce is quite broad, examples of which include the shipment or receipt of goods across state lines or regular communication across state lines via telephone or mail.
The IRS has released the draft forms and instructions for the 2016 tax year, including Form 1040 and its related schedules. There are no drastic changes for the 2016 Form 1040. The following summary will show where the most common changes will appear when filing for 2016.