More than 100 retail and restaurant companies and associations today urged Congress to take quick action on technical corrections to the federal tax reform law that took effect this year, saying drafting errors related to depreciation rules and “carryback” of operating losses are costing both industries millions of dollars.
“The delay in correcting these provisions has caused economic hardship for some retailers and restaurants and is also delaying investments across the economy,”
the Retail Industry Leaders Association, National Retail Federation, NRF’s National Council of Chain Restaurants, and other groups said in a letter to members of the House and Senate tax-writing committees.
Under the Tax Cuts and Jobs Act, remodeling and other improvements to stores or restaurants were supposed to be fully depreciated in the first year the work is done. Instead, a mistake in the legislative language requires that depreciation be done over 39 years. Congressional officials have conceded that the 39-year requirement is a drafting error but have yet to correct the mistake.
“This very large difference in the after-tax cost of making improvements is causing a delay in some store and restaurant remodeling projects, as well as causing some retailers to decline opportunities to purchase or lease new store locations that would require substantial improvements,”
the letter said. “These decisions not only deny communities the jobs associated with substantial construction projects but also deny our communities the opportunity to bring new, permanent jobs to an otherwise abandoned store or to revitalize a declining mall.”
Under a separate error, the legislation got the effective date of carryback eligibility wrong, resulting in “a retroactive tax increase on businesses that are in loss positions and already facing liquidity issues,”
the letter said. “This timing difference is critical to cash-strapped businesses that were counting on the carryback to finance continuing operations as well as investments needed to revitalize their businesses.”
About the Retail Industry Leaders Association
RILA is the trade association of the world's largest and most innovative retail companies. RILA members include more than 200 retailers, product manufacturers, and service suppliers, which together account for more than $1.5 trillion in annual sales, millions of American jobs, and more than 100,000 stores, manufacturing facilities, and distribution centers domestically and abroad.
The National Retail Federation is the world’s largest retail trade association. Based in Washington, D.C., NRF represents discount and department stores, home goods and specialty stores, Main Street merchants, grocers, wholesalers, chain restaurants and internet retailers from the United States and more than 45 countries. Retail is the nation’s largest-private sector employer, supporting one in four U.S. jobs — 42 million working Americans. Contributing $2.6 trillion to annual GDP, retail is a daily barometer for the nation’s economy.
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