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, until 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 and Senate have previously passed different versions of legislation (HR 4213), which includes a provision that would renew and extend the 15-year recovery period, retroactive to January 1, 2010, and through December 31, 2010. The Chairs of the tax-writing committees have agreed on a compromise version of HR 4213 that may be considered in both houses during the week of May 24.