Tax law mistake hurting retailers, restaurants
A mistake in the wording of the recently passed Tax Cuts and Jobs Act is causing some retailers and restaurants to miss out on a write-off that could potentially damage their businesses.
Instead of being able to immediately deduct the entire cost of renovations and other improvements made to non-residential real estate, a small wording mistake means these businesses will get those breaks over the course of 39 years. That actually hurts them when compared with the prior law and diminishes most of the intended benefits. After 39 years, businesses only get a little more than 40% of the total cost being written off, when compared with the intended 100%.
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The problem is that the language didn’t specifically make clear that “any qualified improvement property” would be eligible for the immediate, 100% deduction available for other activities, such as equipment purchases.
“This is freezing people in their tracks,” White Castle Vice President Jamie Richardson told The Wall Street Journal. The Journal reported that the burger chain normally renovates as many as 10 of its 400 U.S. locations each year and has been forced to postpone those projects. Like other restaurants, White Castle relies on periodic store renovations.
Last month, a group of retailers, including Target and Best Buy, wrote a letter to lawmakers urging them to correct the error. This comes at a time when retailers are struggling to keep up with rapidly shifting consumer tastes and increased competition from online rivals such as Amazon.
This snafu was, however, far from the only glitch lawmakers became aware of after the passage of the tax reform law late last year.
While technical errors are not uncommon, it could be harder to fix this time around. No Democratic votes were needed to pass The Tax Cuts and Jobs Act, but Republicans will require help from senators across the aisle to fix the glitch.
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