In the early 1980s, the Reagan Administration handed commercial building investors a tax bonanza in the form of accelerated depreciation, which slashed the depreciable lives of buildings from 39 to 15 years. Partly as a result, commercial construction, particularly office structures, virtually exploded. The 1986 Tax Reform Act helped deflate that building boom by lengthening depreciable lives to 31.5 years. Now, after the Clinton Administration proposed a boost to 36 years, the Senate and the House budget bills are calling for an even larger increase to 38 or 39 years.
The upshot is that depreciation allowances will be back to where they were before the booming 1980s, and the still-bloated office-building industry will find it harder to get up off the floor.