The recently enacted Protecting Americans from Tax Hikes (PATH) Act makes permanent the very favorable 15-year write-off of certain restaurant, retail and other leasehold improvements.

The 15-year write-off provision has existed, in some form or another, since the Great Recession when it was enacted to encourage business investment. Since that time, Congress has extended (with minor tweaks) the provision every year. Going forward, the provisions will be permanent.

The PATH Act extends, but does not make permanent, 50% bonus depreciation. The extension at the 50% level continues through 2016 and 2017 and then starts to decrease, ending in 2020. That provision, coupled with the 15-year write-off for qualified improvements, means that landlords and tenants will now be able to write off 50% of certain improvements immediately and then depreciate the remainder over 15 years. This change will significantly decrease the after-tax cash flow cost of leasehold improvements and should provide a boost for all aspects of the real estate industry – from development through design, construction and occupancy.