A pair of Republican and Democratic senators has introduced bipartisan legislation to fix one of the technical problems in the Tax Cuts and Jobs Act that has kept many retail and restaurant businesses from renovating and repairing their buildings.
Senators Pat Toomey, R-Pa., and Doug Jones, D-Ala., introduced the Restoring Investments in Improvements Act on Thursday to make a technical correction to a provision in the hastily written 2017 tax law provision meant to spur renovations and investment.
The senators noted that an inadvertent drafting error left restaurants, retailers and other leaseholders from taking full advantage of updated expensing rules in the tax overhaul, resulting in cost-prohibitive renovation projects and stalled investments. The Restoring Investments in Improvements Act would help ensure the full cost of store, office or building improvements could be immediately expensed as was originally intended. They noted that the Joint Committee on Taxation has concluded that the legislation would have no impact on the federal budget deficit.
“As a former restaurant owner, I know keeping a small business alive is always a challenge. The federal tax code should not make it more difficult for a restauranteur or a retailer,” Toomey said in a statement. “Capital invested in a company should be fully deductible at the time of the investment. This helps make the investment affordable. Our simple, bipartisan fix recognizes the economic benefits from immediate expensing and will help grow the economy and create jobs.”
The Tax Cuts and Jobs Act included a provision enabling businesses to deduct the cost of certain investments using 100 percent bonus depreciation. But thanks to a drafting error, the new tax law doesn’t allow “qualified improvement property,” or QIP, to take advantage of immediate expensing. Projects excluded from the full and immediate expensing rule include improving the interior of a store, renovating the dining space in a restaurant, installing new signs for a business, upgrading lighting fixtures to more energy-efficient products, and modernizing common areas in office buildings.
“Making sure our local small businesses can invest in themselves is critical for the economic success of Alabama’s communities,” Jones stated. “That’s why this bipartisan legislation is so important: to make sure the Tax Code works as intended, and restaurants, retailers and other businesses can make the improvements they need to make their stores competitive, vibrant, and safe.”
The legislation has been cosponsored by several other senators on both sides of the aisle, including Angus King, I-Maine, Joe Manchin, D-W.Va., Rob Portman, R-Ohio, Pat Roberts, R-Kan., Jeanne Shaheen, D-N.H., Kyrsten Sinema, D-Ariz., Martha McSally, R-Ariz., and John Thune, R-S.D.
Fixing the so-called “retail glitch” in the Tax Cuts and Jobs Act is high on the wish list of many business trade associations. Support for the legislation is coming from the National Restaurant Association, the National Retail Federation, the Real Estate Roundtable, the Retail Industry Leaders Association, the American Institute of Architects, and other groups. Last year, Republicans and Democrats agreed to fix another problem in the new tax law affecting agribusinesses known as the “grain glitch,” but so far the two parties have mostly sparred over what provisions to include in a technical corrections bill. Democrats in blue states have asked for changes such as doing away with the limit on the state and local tax deduction, while Republicans have wanted to confine changes to technical matters such as the retail glitch.