Comprehensive Tax Reform

Tax Reform

In December 2017, President Trump signed into law comprehensive tax reform legislation that achieved RILA’s longstanding goals: providing a significant reduction in the corporate tax rate; adopting a territorial tax system; and promoting a simplified tax system that puts more money in consumers' pockets. The new law included, among other things, a permanent 21 percent corporate tax rate, which is a big win for the retail sector. Retailers, who have historically paid an effective tax rate more than 10 percentage points higher than the average U.S. industry, will now face far more equitable treatment.  

Overview

As America’s largest private-sector employer, retail is an economic driver, supporting over 42 million American jobs and generating over $3.8 trillion in annual sales. A tax code that keeps America globally competitive is vital to retailers and consumers alike. RILA is committed to promoting pro-growth tax policy that benefits retail and the American families we serve each day.   

BAT 

In 2017, RILA led a broad coalition of industries to defeat the proposed border-adjustable tax (BAT), which would have been devastating to the retail sector. The effort focused on highlighting the impact of a 20 percent tax on imported goods on American families. The industry’s success in this regard elevated retail's status in Washington. With the BAT defeated, RILA successfully educated lawmakers and the Administration on what should be included in a tax reform bill that would benefit retailers, our employees, and customers.  

Tax Reform Guidance and Technical Corrections

Many retailers have followed through on their promise to invest a significant portion of the financial benefits from tax reform in their employees through pay increases, bonuses, and enhancements to benefit programs. RILA is working closely with our member companies to identify the wide range of guidance and technical corrections to the legislation that will need to be issued to ensure Congressional intent is followed and to shape the compliance obligations for all businesses in the coming years. To date, RILA has submitted comments to Treasury/IRS on guidance issued in the following areas: complex new rules for calculating taxes owed on foreign-source income and new requirements regarding the deductibility of payments made to government entities for settlement payments. Both issues have broad applicability for the retail industry.  

Qualified Improvement Property (QIP) 

Since the beginning of 2018, RILA has been working to fix a drafting error in a provision of the new law that was intended to provide a favorable 15-year recovery period for “Qualified Improvement Property (QIP),” which includes retail property. Because of this error, such property must instead be written off over 39 years and is not eligible for immediate expensing as intended by Congress. In August of 2018, RILA, joined by many of our member companies, sent a letter signed by 283 organizations to Treasury Secretary Mnuchin, urging the Treasury Department to issue guidance that says companies can rely on Congressional intent rather than the incorrect statutory language in applying the new recovery period for qualified improvement property. RILA remains actively engaged in a coalition of similarly situated industries lobbying the Hill and Treasury on the issue. Bipartisan stand-alone legislation has recently been introduced in the House and Senate that would fix the drafting error. RILA issued press releases in support of both bills. RILA is hopeful that Congress will address the issue as part of a technical corrections bill sometime later this year.    

 Work Opportunity Tax Credit (WOTC) 

Another important issue is the Work Opportunity Tax Credit (WOTC), which expires at the end of the year.  WOTC, a tax credit for employers that hire employees who are members of one of 10 targeted groups who would otherwise have difficulty finding employment, is used by many retailers. RILA is actively engaged as part of a broader coalition encouraging Congress to make WOTC permanent and recently submitted a statement to the House Ways and Means Committee for the hearing record with that message.