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National Restaurant Association - House legislation would reduce tax burden on restaurants

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House legislation would reduce tax burden on restaurants

A bipartisan group of representatives has introduced legislation establishing a permanent 15-year tax depreciation schedule for restaurant improvements/new construction as well as for leasehold and retail improvements.

The National Restaurant Association supports the Restaurant and Retail Jobs and Growth Act, which was introduced Thursday by Reps. Mike Kelly (R-Pa.), Richard Neal (D-Mass.), Jim Gerlach (R-Pa.) and Ron Kind (D-Wis.).

The 15-year depreciation schedule was one of 55 tax provisions that expired at the end of last year. Historically, Congress has voted to renew the 15-year schedule, providing tax relief to restaurant owners whose stores are in the midst of renovations or new construction. NRA research shows that uncertainty surrounding the tax depreciation schedule is a factor in decisions to take on new renovation or construction projects.

“Restaurants experience heavy wear and tear,” said Dave Koenig, National Restaurant Association vice president, tax and profitability. Making the 15-year depreciation provisions permanent provides restaurateurs with the predictability and additional cash flow needed to plan for future investments, and we appreciate the leadership shown by these members in introducing this important legislation.”

Some of the areas classified as “qualified restaurant property,” and eligible for the 15-year schedule, are the building shell, the general building electrical system, fire protection systems, general building lighting, security systems ceramic tile, general building HVAC, general building plumbing, and restroom fixtures and accessories, according to Brad Westrum, a strategic federal tax services director for Grant Thornton in Minneapolis.

A 15-year schedule can make a major difference in tax savings for restaurant owners, Westrum said. “You’re cutting the amount of time by more than half,” he said. “You’re able to accelerate that depreciation, which, from a net present value perspective, is significant.”

The NRA also supports companion legislation introduced by Sens. Bob Casey (D-Pa.) and John Cornyn (R-Texas) to make the 15-year depreciation schedule permanent.  The bill currently has 22 bipartisan cosponsors.  The Association recently reiterated its support for a permanent, 15-year depreciation schedule in a letter to former Senate Finance Committee Chairman Max Baucus (D-Mont.), who had proposed extending the depreciation schedule to 43 years.

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