Bipartisan bill would bring restaurant taxes down—permanently

The U.S. House and Senate are considering bills that would put in place a 15-year tax depreciation schedule for restaurant improvements and new construction, leasehold improvements and retail improvements. If the legislation passes Congress and is signed by President Obama, it would mean the end of the uncertainty that has led restaurant operators across the country to put improvement projects on hold while they awaited word on the tax treatment of the projects.

Historically, Congress has renewed the 15-year depreciation schedule every year or two, but partisan battles last year delayed renewal until just before the year ended and only applied retroactively for 2014. Without action, improvements and new construction will be subject to a 39.5-year depreciation schedule.

National Restaurant Association (NRA) research shows that a 15-year depreciation schedule is more in line with reality for restaurant operators. A 2014 NRA survey of 1,000 restaurateurs found that a majority of restaurant operators said it was necessary to renovate or remodel their dining areas and kitchens a median of every five years. Only eight percent of restaurant operators said they could wait more than 10 years to renovate or remodel their kitchen area, while just six percent said they could wait more than 10 years to improve their restaurant’s dining area.

The issue has bipartisan support, with bills being introduced in the Senate by Sens. Bob Casey (D-Pa.) and John Cornyn (R-Texas) and in the House by Reps. Mike Kelly (R-Pa.) and Richard Neal (D-Mass.). The latest 15-year depreciation schedule expired at the end of 2014. Both the House and Senate are most likely to vote on permanent extension of the 15-year schedule as part of a larger package of tax provisions.

Economic impact

The economic benefits of a 15-year depreciation schedule are felt well beyond the walls of restaurants. NRA research conducted in 2012 found three in 10 restaurateurs had delayed renovation and construction projects because they weren’t sure how those projects would be taxed. Those projects stood to generate $23 billion in economic activity and create 200,000 jobs across construction and other industries.

Typical renovations eligible for the 15-year depreciation schedule include the building shell, electrical system, fire protection systems, lighting, security systems, ceramic tile, HVAC, plumbing, and restroom fixtures and accessories.    

Senators introduce 15-yr. depreciation bill

Sens. Bob Casey (D-Pa.) and John Cornyn (R-Texas) have introduced a bill to make permanent a 15-year tax depreciation schedule for restaurant improvements and new construction, leasehold improvements and retail improvements.

 

The National Restaurant Association supports the bill, which would allow restaurateurs, landlords and other owners of commercial property to continue to write off property improvements and the cost of new restaurant construction over 15 years. Without congressional action, the current 15-year depreciation schedule will expire and revert to a 39-year schedule at the end of the year. NRA research shows that restaurants undergo significant renovations every six to eight years, on average.

“Restaurants experience heavy wear and tear serving 130 million guests a day at nearly 1 million establishments nationwide,” said Scott DeFife, NRA executive vice president, policy and government affairs. “Making the 15-year depreciation provision permanent provides restaurant operators with the predictability needed to plan for future investments, and we commend Sens. Casey and Cornyn for their leadership on this critical issue for our industry.”

"Small businesses are the backbone of our economy," Casey said. "We should provide them with the certainty they need to grow."

The original cosponsors of the bipartisan legislation are Kay Hagan (D-N.C.), Debbie Stabenow (D-Mich.), Mike Crapo (R-Idaho), Bob Menendez (D-N.J.), James Risch (R-Idaho), Jim Inhofe (R-Okla.), Sherrod Brown (D-Ohio), Mark Begich (D-Alaska), Susan Collins (R-Maine), Amy Klobuchar (D-Minn.), David Vitter (R-La.), and Roger Wicker (R-Miss.).

NRA continues push for permanent 15-year tax depreciation schedule for restaurants

The National Restaurant Association today applauded Senators Bob Casey (D-Pa.) and John Cornyn (R-Texas) for introducing legislation (S. 749) to make permanent a 15-year tax depreciation schedule for restaurant improvements and new construction, leasehold improvements and retail improvements. 

Under the bipartisan bill, restaurateurs, their landlords and other commercial-property owners could write off the cost of improvements to property, as well as the cost of new construction for restaurants, over 15 years, which is more in line with marketplace reality rather than 39 years. The current 15-year schedule for these investments is set to expire at the end of 2013.

“Restaurants experience heavy wear and tear serving 130 million guests a day at nearly one million establishments nationwide,” said Scott DeFife, Executive Vice President, Policy and Government Affairs, National Restaurant Association. “Making the 15-year depreciation provisions permanent provides restaurant operators with the predictability needed to plan for future investments, and we commend Senators Casey and Cornyn for their leadership on this critical issue for our industry.” 

National Restaurant Association research shows that restaurants undergo significant renovations every six to eight years, on average.

DeFife added that the measure would help create jobs beyond the restaurant industry, as construction spending has a significant ripple effect throughout the rest of the economy. The industry spent $6.1 billion on new construction in 2011, adding approximately 172,000 jobs to the economy.

The quicker depreciation schedules would apply to new restaurant construction as well as investments in property such as interior walls, wiring, partitions, plumbing, and energy-efficient heating and cooling systems in restaurants, offices and other commercial space.

The National Restaurant Association is a leader of the Depreciation Fairness Coalition, a group of restaurants, trade associations, and other organizations that support permanent extension of the 15-year depreciation schedule for restaurant improvements and new construction, leasehold improvements, and retail improvements.

The following Senators are original cosponsors of the legislation: Debbie Stabenow (D-Mich.), Mike Crapo (R-Idaho), Bob Menendez (D-N.J.), James Risch (R-Idaho), Jim Inhofe (R-Okla.), Sherrod Brown (D-Ohio), Mark Begich (D-Alaska), Susan Collins (R-Maine), Kay Hagan (D-N.C.), Amy Klobuchar (D-Minn.), David Vitter (R-La.), and Roger Wicker (R-Miss).