Now that Congress is back in their lame duck session, restaurant operators need four important tax provisions extended or made permanent before the end of the year or face negative consequences to their 2015 operations:
- Section 179 expensing at a $500,000 level with inclusion of qualified real property (i.e. restaurants) as property eligible for such treatment.
- The 15-year depreciation schedule on restaurant-building improvements and new construction, retail improvements, and leasehold improvements.
- The Work Opportunity Tax Credit (WOTC), which offers businesses tax credits of $2,400 to $5,600 for hiring employees from demographic groups who historically have a hard time finding employment.
- The enhanced tax deduction for businesses and individuals that donate food inventory to charity.
Like other high-customer volume businesses, restaurants must constantly make improvements to keep up with structural and cosmetic wear and tear caused by customers and employees. As an example, the restaurant industry alone has more than 130 million customers patronize restaurants each day. Unfortunately, the 15-year depreciation schedule for these properties expired at the end of 2013, and a 39-year schedule is now used. Even when it was in effect, the 15-year depreciation schedule was only temporary and had to be frequently renewed, a process that creates economic uncertainty for businesses and needs to be addressed.
Likewise, the Section 179 immediate deduction of up to $500,000 for business equipment, software, and qualified real property expired at the end of 2013 and reverted back to a deduction of only $25,000 and excludes qualified real property from such treatment. This expensing provision will encourage restaurants to undertake capital expenditures, and these will have a multiplier effect, spurring economic activity and job growth in communities throughout the country.
Restaurants, as an industry, are the nation's second-largest private-sector employer. Our industry is known for giving opportunities to low-skilled and unskilled workers to gain valuable experience, earn a living, and improve their situation. The Work Opportunity Tax Credit is one tool that allows us to make those opportunities possible for disabled veterans, individuals receiving certain types of public assistance, people with disabilities, and other groups that are historically difficult to employ. With its tax credits of $2,400 to $5,600 per worker, the WOTC helps open doors for those who might otherwise have no option but to collect public assistance. This means the WOTC, in addition to opportunities, helps create savings for both business owners and federal, state and local governments.
As a cornerstone to each community they serve and in an effort to be a good citizen of their community, restaurants often donate their surplus goods to local charities that provide for those in need. The enhanced charitable deduction for food donation helps offset the cost of storing and transporting extra food that restaurants donate to charity. Without the deduction, taxpayers would receive no more of a deduction for donating food than they would for throwing it away.
Across the country, the restaurant industry is creating jobs for millions of Americans, whether it's their first job or life-long career. Renewal of these critical tax provisions will help restaurateurs nationwide continue to provide opportunity and pathways to success for individuals of all backgrounds and skill levels looking to enter the foodservice industry.
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