Bipartisan Group of Senators Introduce Legislation to 2017 Tax Law to Help Restaurants and Retailers

This week, U.S. Senators Doug Jones, D-Ala., and Pat Toomey, R-Penn., introduced the Restoring Investments in Improvements Act, bipartisan legislation that ensures restaurants and retailers can take full advantage of a 2017 tax law provision meant to spur renovations and investment.

Last year’s Tax Cuts and Jobs Act made significant changes to the federal tax code, including allowing businesses to immediately write off costs associated with improving facilities instead of having to write off those expenses over 15 years.

But an inadvertent drafting error required restaurants, retailers, and other leaseholders to instead write those expenses off over a much longer period of 40 years, resulting in cost-prohibitive renovation projects and stalled investments.

Senators Jones and Toomey’s new legislation – the Restoring Investments in Improvements Act – would ensure the full cost of store, office, or building improvements can be immediately expensed as was originally intended. The Joint Committee on Taxation has concluded that this legislation would have no impact on the federal budget deficit.

“Making sure our local small businesses can investment (sic) in themselves is critical for the economic success of Alabama’s communities. That’s why this bipartisan legislation is so important, to make sure the tax code works as intended, and restaurants, retailers, and other businesses can make the improvements they need to make their stores competitive, vibrant, and safe,” Senator Jones said.

“As a former restaurant owner, I know keeping a small business alive is always a challenge. The federal tax code should not make it more difficult for a restauranteur or a retailer,” said Senator Toomey. “Capital invested in a company should be fully deductible at the time of the investment. This helps make the investment affordable. Our simple, bipartisan fix recognizes the economic benefits from immediate expensing and will help grow the economy and create jobs.”

When enacted, the Tax Cuts and Jobs Act removed tax barriers to many different types of business investments, allowing businesses to save money by deducting the cost of certain investments under a provision known as “100 percent bonus depreciation.”

However, due to a drafting error, the new tax law does not allow “qualified improvement property” (QIP) to take advantage of immediate expensing. Projects excluded from this new full and immediate expensing rule could include improving the interior of a retail store, renovating the dining space in a restaurant, installing new signs for the business, upgrading lighting fixtures to more energy-efficient products, and modernizing common areas in office buildings.

Without the Restoring Investments in Improvements Act, these projects could be cost-prohibitive, and those already in progress may be stalled or ended altogether.

This legislation is cosponsored by Senators Angus King, I-Maine, Joe Manchin, D-W.Va., Rob Portman, R-Ohio, Pat Roberts, R-Kan., Jeanne Shaheen, D-N.H., John Thune, R-S.D., Kyrsten Sinema, D-Ariz., and Martha McSally, R-Ariz..

The bill is supported by over a dozen industry organizations, including the Alliance to Save Energy, American Institute of Architects, Associated General Contractors, Commercial Real Estate Development Association, International Association of Fire Chiefs, International Council of Shopping Centers, National Association of Convenience Stores, National Association of Real Estate Investment Trusts, National Electrical Manufacturers Association, National Franchisee Association, National Grocers Association, National Restaurant Association, National Retail Federation, Petroleum Marketers Association of America, Real Estate Roundtable, and Retail Industry Leaders Association.