Should A Roof Be Depreciated Over 39 Years?
H.R. 426: Green Roofing Energy Efficiency Tax Act of 2009
It should be no surprise that the 111th Congress is faced with yet another attempt at fixing the disparity in Roof System Investment Recovery. Like its predecessors, H.R. 426 would correct the tragic tax depreciation schedule of 39 years for non-residential roof systems.
The same bill has been introduced seven times since 2003 when Senator Jim Bunning [R-KY] first penned S. 1679 during the 108th Congressional term. Representative Mark Foley [R-FL] provided key House support with H.R. 3310 that same year.
Similar bills were reintroduced in 2005 and 2007 spanning four Congressional terms. All would amend the Internal Revenue Code of 1986 reducing the depreciation period for roof systems. And, all fall short of a realistic depreciation based on an actual life-cycle various types of roof systems.
The original bill called "Realistic Roofing Tax Treatment Act of 2003" have been reintroduced and/or renamed in three additional terms of Congress. The latest version is identified as H.R. 426: Green Roofing Energy Efficiency Tax Act of 2009.
In this case, the IRS is not at fault as legislation is managed and enacted by Congress. There is a long history behind modifications to building depreciation schedules, calls for reform and studies that demonstrate current depreciation models for commercial roof systems are misaligned
Clearly, depreciating a roof over 39 years penalize property owners and management firms. To begin with, investors choose roof systems based on a weighted conclusion of several variables. Regardless of the system selected and its price, the Expected Life-Cycle of most roof systems are either 10, 15 or 20 years.
The latter period of twenty years is the targeted depreciation rate of Legislative Bills by Senator Jim Bunning and those who followed. The success of this or a similar bill would be a vast improvement and likely spur economic investments.
A fair and just method of depreciating a new roof system would be based the Actual Serviceable Life of the replacement roof - up to the point of failure. Warehouse and industrial construction is often expected to last ten years because general contractors tend to take short-cuts and lead with low bidders regardless of experience.
Roof resurfacing solutions last ten to fifteen years whereas a replaced roof may not reach the expected warranty life-cycle. Nonetheless, the Actual Life Cycle of roof systems are affected by the quality of installation, volume of rooftop equipment and trade traffic.
Building Owners, Investors, Property Managers and NNN Tenants all share a common interest when they shell out hundreds of thousands of investment dollars to restore roof assets.
Interest in seeing the sought after amendment passed is location neutral as it affects buyers whether they're in New York, Silicon Valley or anywhere in between.
Given how legislators demonstrated a lack of commitment to their constituents in the months after August 2009 town hall meetings and seven years in the making of H.R. 426, its questionable weather the 111th Congressional members will act any different.
CRS believes Congress is suppose to work for us so we are encouraging local Congressional representatives to step up and take accountability.
Our letters to local Congressional members on behalf of our clients are available on-line. We invite interested parties in Silicon Valley and across the country speak out on issues that affect them.
Kevin Cardoza has been a Technical Consultant for more than twenty years at CRS Roof Consultants and can be reached at (408) 871-9296. References herein are available at: http://www.CRSRoofConsultants.com/congress.html |
