For more than 10 years, a temporary provision in the depreciation rules has allowed a 15 year recovery period for the cost of making improvements to leased property. This rule expired as of January 1, 2010, however. Thus, unless Congress acts to renew and extend the provision, the cost recovery period is now 39 years, with the improvements being treated as part of the cost of the underlying real property.

The House of Representatives has passed HR 4213, a bill that extends this and dozens of other expiring provisions on a mostly party-line vote of 241 - 186. The bill is "paid for" by changing the tax treatment of real estate partnership carried interests from capital gains rates (currently 15%) to ordinary income treatment (as high as 39.6%). The Senate was unable to act on this bill or on other measures to extend expiring provisions. The so-called carried interest "pay-for" is very controversial in the Senate. No agenda will emerge until Congress comes back into session (about January 21). It is not known when/if Congress will renew the expired provisions.