Independent Grocers ask Treasury to Fix Tax Reform Law Error
A drafting error in the Tax Cuts and Jobs Act could delay store remodeling projects and lead to fewer jobs, NGA contends
The National Grocers Association (NGA), representing independent grocers, together with a coalition of businesses and industry groups, sent a letter to Treasury Secretary Steven Mnuchin asking that he issue guidance fixing errors in the 2017 Tax Cuts and Jobs Act related to depreciation rules. Almost 300 businesses and associations, including Arlington, Va.-based Food Marketing Institute, signed the letter, with operators of independent grocery stores accounting for 160 signers.
The tax law, which was signed into law last December, includes a provision known as “100 percent bonus depreciation,” which permits businesses to immediately write off the full costs of short-lived investments. Because of a drafting error in the bill, however, some categories of business investment, most notably qualified improvement property (QIP), are excluded from eligibility. The error defaults the write-off period for QIP to periods as long as 39 years, compared with the 15-year period that existed under the old tax code.
“The drafting error in the QIP provision causes improvements to buildings to be written off over 39 years instead of one year as contemplated under the Act,” the letter notes. “As a result, a taxpayer gets to write off only 2.5 percent of their improvement costs in the year the expenditures are made, and 97.5 percent over the remaining 38 years, instead of writing off 100 percent of the cost in the year the expenditures are made. 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. 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.”
“America’s independent supermarkets are a vital part of the economy, and it’s critically important that these business owners are afforded the opportunity to fully depreciate improvements made to stores as Congress originally intended,” said Greg Ferrara, EVP of advocacy, public relations and member services at Arlington-based NGA. “On behalf of a strong and unified independent supermarket industry, we urge the Treasury to resolve this drafting error as quickly as possible so that grocers can have the confidence to upgrade their stores, expand offerings [and] hire additional staff, which in turn helps to grow their local economies.”