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New depreciation schedule for commercial roofs, May 2005


NRCA proposes that Congress should amend section 168 of the Internal Revenue Code to provide a shorter, more realistic recovery period for the depreciation of commercial roof systems.


The bipartisan Realistic Roofing Tax Treatment Act of 2005 (H.R. 1510) was introduced by Rep. Mark Foley (R-Fla.) and Rep. Stephanie Tubbs Jones (D-Ohio) April 6 and would reduce the depreciation recovery period for commercial roof systems from the present 39-year schedule to a more realistic 20-year period.

Prior to the 1980s, separate building components could be depreciated at different rates, but in 1981, Congress eliminated component depreciation and put in place a general depreciation period of 15 years for all building components. In 1993, the depreciation recovery period for nonresidential property was extended to 39 years to raise additional revenue.

The current 39-year depreciation period is not a realistic measure of the average life span of a commercial roof and serves as a disincentive for building owners to replace failing roofs. If an owner replaces a roof before 39 years have elapsed, the owner still must carry that roof on the books even though it no longer exists. The Treasury Department's Report to the Congress on Depreciation Recovery Periods and Methods (July 2000) corroborated this quandary, finding "... a 'cascading' effect, where several roofs are being depreciated at the same time even though only one is physically present."

A recent study by the industrial research firm Ducker Worldwide determined the current aggregate commercial roof life span is approximately 17 years, less than half the depreciation period. Ducker Worldwide also estimates that a shortened schedule would stimulate economic activity, generating 40,000 new jobs.

Policy benefits

Adoption of a new class life would satisfy important policy goals—energy conservation (the Ducker Worldwide study found that 90 percent of building owners choose more energy-efficient systems when they replace their roofs); job creation; tax relief for the U.S. manufacturing sector; and a growth impetus for the construction industry. With a new depreciation schedule for roofs, business owners would no longer put off needed roofing work, opting instead to purchase newer, more efficient systems. And if the number of years over which one depreciates property and the number of years over which a property deteriorates are commensurate, the business owner would have strong incentive not to risk structural damage to save a few dollars.

Because a 39-year depreciation schedule for commercial roofs makes little economic or environmental sense, NRCA proposes allowing building owners to depreciate commercial roofs over a 20-year period. The change would address the issue of the appropriate recovery period and allow for the recognition of legitimate losses. NRCA urges Congress to pass H.R. 1510.

(May 2005)

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