Issue 1, May 2002

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Impact Fees – New Deduction Ruling
Like many states, Indiana adopted “impact fee” legislation several years ago. Impact fees are simply fees that can be imposed by local government to help offset the impact of new development on a community. Until recently the Internal Revenue Service treated impact fees assessed by local governments as non-deductible land costs. On February 15, 2002, the IRS issued Revenue Ruling 2002-9 which provides that impact fees, incurred by a taxpayer in connection with the construction of a new residential rental building, should be treated as capitalized costs allocable to the building. The impact fees are considered indirect costs, rather than land costs, because they are incurred by reason of and directly benefit the taxpayer’s production activity. The result of this ruling is that a taxpayer can depreciate the impact fees over the useful life of the buildings. This ruling changes the IRS’s prior position that prevented taxpayers from depreciating impact fees. 

For more information about how this ruling may affect your business, please contact a member of the Real Estate Group.

U.S. Supreme Court Deals with Regulatory Taking Issue at Lake Tahoe
On April 23rd, the U.S. Supreme Court issued its long-awaited opinion in the Tahoe Regional Planning Agency case. This was a “regulatory taking” case involving a question of whether a government agency would need to compensate certain property owners for the loss of use of their property resulting from the imposition of a “temporary” moratorium on construction surrounding Lake Tahoe. 

In the Tahoe Regional Planning Agency case, the U.S. Supreme Court found that the construction moratorium did not constitute a regulatory taking under either the “deprivation of all economically beneficial use” test or under the “balancing” test.  Given the important public interest in clean water, the temporary nature of the moratorium and the fact that the Tahoe Regional Planning Agency worked diligently during the moratorium  to address this public interest, the court found that no taking had occurred.  As a result, no compensation was due.
FULL STORY

New Attorney Joins Real Estate Group
Harry Todd joined the Bose McKinney & Evans Real Estate Group as a partner.  Harry has more than 18 years of experience, working both in private practice and as general counsel for private corporations.  Most recently, he worked for Gibraltar Properties, Inc., a real estate acquisition and development company that owns and manages office buildings, retail centers and apartment complexes.