Tax Law Typos Stick It To Retailers, With No Quick Fix In Sight
Soon after the The Tax Cuts and Jobs Act of 2017 passed in December, it became clear that the bill was marred by typos and drafting errors.
Two errors in particular have retailers and restaurant owners up in arms because they are inadvertently costing them money.
One is a provision that concerns "qualified improvement property," which specifies that certain renovations to retail and restaurant space must be written off over a period of 39 years instead of one year. As a result, only 2.5% of the cost of renovation can be deducted in a single year, instead of all of it, as the law actually intended.
Previously, 84% of the cost of some store improvements could be depreciated over 15 years, with half of the deduction coming in the first year. The tax bill intended to offer a 100% write-off through 2022, but the actual language did otherwise.
The other error imposes a retroactive tax increase on businesses that are losing money and already facing liquidity issues — something a fair number of retailers face.
Recently, more than 100 retailers, restaurants and trade groups sent a letter to ranking Republicans and Democrats on the congressional tax-writing committees, urging a fix for the misbegotten tax text.
The letter was signed by the National Retail Federation and Retail Industry Leaders Association, but also a good number of heavy-hitters in the retail game, such as Target Corp., Macy's and Best Buy.
"The large difference in the after-tax cost of making improvements is causing a delay in some store and restaurant remodeling projects, as well as causing some retailers to decline opportunities to purchase or lease new store locations that would require substantial improvements," the letter said.
All bills include mistakes, but the sheer number of text glitches is unusual, with the blame given to the speed at which the legislation was pushed through Congress, Politico reports.
Since then, Bloomberg reports, industry lobbyists have been pushing in vain for a correction. The effort has failed not because any member of Congress is against that particular correction, but because it is hard for the legislative branch to do much at all.
Fixing the language in theory would be a simple matter, but the circumstances under which the bill was passed, along with the stark divide between the parties, complicates matters, Bloomberg reports.