Foodservice Equipment Reports

Bipartisan Bill Would Set Lower Taxes For Restaurant Construction And Improvements

Both the House and Senate are considering bills that would permanently lower the taxes paid by restaurant operators. The legislation would create a 15-year tax-depreciation schedule for new restaurant construction as well as restaurant, leasehold and retail improvements. If the bills pass Congress and are signed by President Obama, it would end the uncertainty that has put improvement projects on hold while operators awaited word on the projects’ tax treatment.

Historically, Congress has renewed the 15-year depreciation schedule every year or two, but in 2014, partisan battles and election-year politics delayed renewal until just before the year ended so it now applies only retroactively for 2014. Without action, improvements and new construction will be subject to a 39½-year depreciation schedule.

A 15-year depreciation schedule is more realistic for restaurant operators, according to research from the National Restaurant Association. Last year, the NRA surveyed 1,000 operators and found a majority said it was necessary to renovate or remodel their dining areas and kitchens a median of every five years. Only 8% of operators said they could wait more than 10 years to renovate or remodel their kitchen area while just 6% said they could wait more than 10 years to improve their dining area.

NRA research conducted in 2012 found three in 10 restaurant operators had delayed renovation and construction projects because of uncertainty over how those projects would be taxed. Typical renovations eligible for the 15-year depreciation schedule include the building shell, electrical systems, fire-protection systems, lighting, security systems, ceramic tile, HVAC, plumbing and restroom fixtures and accessories.

Both the House and Senate are most likely to vote on permanent extension of the 15-year schedule as part of a larger package of tax provisions; partisan wrangling over other tax policies could delay or affect its passage.

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