Foodservice And Tax Reform Make a Heady Mix

Reforming the tax code would have a huge impact on the way foodservice businesses operate, according to accounting experts who spoke May 7 at the 2012 NRA Show in Chicago.

Bob Carroll, of Ernst and Young’s quantitative economics and statistics division, said the restaurant industry would be affected by any proposed changes to the tax code. "One-size-fits-all tax reform does not work for a diverse industry like the restaurant industry."

He asserted that the major hurdle affecting tax reform is the leadership to move forward. No matter who is president after November, Carroll told session attendees, "There will be a strong desire on both [the Democratic and Republican] sides to deal with entitlement reform."

Carroll and Dave Koenig, the NRA’s v.p.-tax and profitability, said the Widen-Coats Bipartisan Tax Fairness and Simplification Act of 2011 and the President’s Fiscal Responsibility Commission report are starting points for tax reform.

Potential key impacts of tax reform under either or both plans could include:

• Dividends and capital gains would be taxed at a top rate of 35%.

• Repeal of the FICA tip credit, which would affect full-service operators.

• Repeal of the 15-year depreciation provision.

• Limited deductibility of interest expenses.

• Repeal of graduated corporate tax-rate schedule.