The National Retail Federation called on the House to quickly pass two pieces of legislation that would help retailers remodel their stores by making important tax provisions permanent. H.R. 765, the Restaurant and Retail Jobs and Growth Act, sponsored by Representative Mike Kelly, R-Pa., and H.R. 2510, a measure permitting “bonus depreciation” sponsored by Representative Pat Tiberi, R-Ohio, were approved this week by the House Ways and Means Committee, clearing the way for consideration by the full House.
The Kelly bill would make permanent a provision allowing retailers to write off the cost of remodeling and other improvements to their stores over 15 years instead of the standard 39-year timeline for buildings. The Tiberi bill would make permanent a provision that allows businesses that make capital investments, including leasehold improvements, to deduct half the cost immediately and then depreciate the remainder over the appropriate period. In addition, it would expand the provision to include owned stores rather than only leased stores. Both provisions were in place on a temporary basis until they expired at the end of 2014, but would be renewed retroactively under the legislation and become a permanent part of tax law.
“Retailers update or remodel their stores every five to seven years to remain competitive, but the high after-tax cost of making these investments often delays these much-needed updates,” NRF Senior Vice President David French said. “These bills would provide important investment incentives that would spur our sluggish economy.”
NRF has long fought for legislation that would make these and other tax provisions permanent rather that requiring them to be repeatedly renewed on a temporary, year-by-year basis. The measures reduce the tax cost of making store improvements necessary for retailers to maintain and grow their customer base.　Retailers’ remodeling provides many additional jobs to the economy, but long-term planning is difficult when their status is uncertain from year to year, says NRF.
The two provisions are important to retailers because they make remodeling more affordable by providing upfront a greater portion of the tax benefits offered to businesses for making renovations. To illustrate, if a store spent $500,000 on expanding its showroom, current depreciation law would only allow less than $13,000 of the expansion costs to be deducted by the business in the first year, with depreciation spread out over nearly four decades. However, H.R. 2510 and H.R. 765 together would allow that same store to deduct $250,000 from its tax bill the first year and then spread out the remaining $250,000 over the next 14 years, freeing up more money early on for further investment.
