The CARES Act provides a technical correction to a drafting error in the 2017 tax reform act, which had omitted qualified improvement property (QIP) from the definition of qualified property eligible for additional first-year (bonus) depreciation. The IRS has released Rev. Proc. 2020-25, allowing taxpayers to change depreciation for QIP placed in service after 31 December 2017. The revenue procedure also allows taxpayers to make certain elections late or to revoke or withdraw previous elections.
A taxpayer that placed QIP created by the taxpayer in service after 2017 may claim missed depreciation for the property. A taxpayer that treated the property as 39-year property is on an impermissible method of accounting and must change to a permissible method by filing either an amended return or a Form 3115 under the automatic procedures. Taxpayers also may use these procedures to make late depreciation elections or revoke bonus depreciation elections.