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National Restaurant Association - Tax reform would have major impact on restaurant business

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Tax reform would have major impact on restaurant business

Reforming the tax code is a major legislative issue, one that could have a huge impact on the way restaurant businesses operate, accounting experts said during an education session at the 2012 National Restaurant Association Restaurant, Hotel-Motel Show in Chicago.

The session, led by Dave Koenig, the NRA's vice president of tax and profitability, and Bob Carroll of accounting firm Ernst and Young's quantitative economics and statistics division, was held earlier this week at the show. The two focused on what restaurateurs can expect regarding tax reform.

"The major hurdle [affecting] tax reform will be the leadership to move forward," Carroll told session attendees. "If Obama is re-elected, there will continue to be a [Congressional] divide. If Romney is elected the path for tax reform becomes clearer." However, he added, "There will be a strong desire on both [the Democratic and Republican] sides to deal with entitlement reform."

Carroll and Koenig looked at facets of the Widen-Coats Bipartisan Tax Fairness and Simplification Act of 2011 and the President's Fiscal Responsibility Commission report as a jumping off point of where tax reform could go.

Potential key impacts of tax reform under either or both plans could include:

• Dividends and capital gains would be taxed at a top 35 percent tax rate

• Repeal of FICA tip credit, which would affect full-service operators

• Repeal of 15-year depreciation provision

• Limited deductibility of interest expenses

• Repeal of graduated corporate rate schedule

Carroll said the restaurant industry would be greatly affected by the proposed changes to the tax code because, "One-size-fits-all tax reform does not work for a diverse industry like the restaurant industry."

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