Summary

Makes three major tax changes for businesses and property owners: it permanently restores 100% bonus depreciation for qualified property, creates a new inflation‑adjusted multiplier to increase allowable depreciation for residential and nonresidential real property over time, and reverses a prior requirement to amortize certain research and experimental (R&E) expenses so those costs can be deducted when paid or incurred. The bill includes rules about how the new depreciation adjustment is calculated, options for taxpayers to opt out for particular property, and timing rules that apply retroactively in some cases.

Key Points

• Makes 100% bonus depreciation permanent for qualified property placed in service after Sept 27, 2017.
• Creates a neutral cost recovery ratio that adjusts depreciation for residential rental and nonresidential real property using the GDP deflator plus a 3% annual factor.
• Allows taxpayers to irrevocably elect out of the neutral depreciation adjustment for particular property.
• Specifies that extra deductions from the neutral adjustment do not reduce tax basis or create ordinary recapture and do not alter pass‑through basis rules.
• Reverses prior amortization rules by allowing immediate deduction of research and experimental expenditures (effective for tax years beginning after 12/31/2021).
• Makes conforming and technical edits across the tax code to integrate the permanent expensing and depreciation changes.
• Applies some provisions retroactively or as if included in the 2017 tax act, and applies other changes to tax years ending on or after enactment.
• Adjusts AMT calculations to incorporate the neutral depreciation ratio where applicable.
• Increases near‑term tax benefits for capital investments and R&E, with potential revenue cost to the Treasury.
• Adds administrative complexity via GDP deflator calculations, opt‑out elections, and amended filing/adjustment considerations.

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