Fiscal Cliff Deal Extends 15-Year Tax Depreciation For Operators

A fall off the so-called fiscal cliff was skirted by Congress’s New Year’s passage of the American Taxpayer Relief Act. Buried in the Act were a number of tax breaks for many individuals and small-business owners–including foodservice operators.

The fiscal bill, which President Obama signed into law Jan. 2, includes a one-year extension of the 15-year tax depreciation schedule for restaurant structural improvements, new construction and leasehold and retail improvements. The law also authorizes an additional year of 50% bonus depreciation for specific equipment.

The National Restaurant Association led a coalition of retail and other interests pushing for an extension of the shorter depreciation schedule for restaurant improvements and new construction. In the past, an individual leasing a building and spending heavily on renovations to create a restaurant would be able to deduct those costs over the next 39 years. A provision allowing restaurants to reclaim the costs over 15 years, and providing them larger deductions, expired in 2011, but now will become retroactive for ‘12 and extend through ‘13.

The Work Opportunity Tax Credit and the enhanced deduction for charitable food donation also were renewed retroactive to Jan. 1, 2012, through 2013. The WOTC provides businesses with a credit of up to $2,400 per year for employees hired from certain hard-to-employ groups. The charitable-deduction provision ensures that smaller companies qualify for the same tax deduction as larger companies when they donate food.

“Renewing these through 2013 will, for the short term, ensure some certainty for restaurateurs,” said Liz Garner, the NRA’s director of commerce and entrepreneurship. “It also will give Congress time to focus on more comprehensive tax reform in 2013.”

Failure to renew the extensions would have meant less operating capital for operators to reinvest back into their businesses.