Retailers, restaurants press Congress for technical fixes in GOP tax law

Retailers, restaurants press Congress for technical fixes in GOP tax law
© Greg Nash

A group of more than 100 retailers, restaurants and trade groups are urging Congress to take "quick action" on making two technical corrections to the tax law that President TrumpDonald John TrumpSunday shows preview: Trump sells U.N. reorganizing and Kavanaugh allegations dominate Ex-Trump staffer out at CNN amid “false and defamatory accusations” Democrats opposed to Pelosi lack challenger to topple her MORE signed last year.

"The delay in correcting these provisions has caused economic hardship for some retailers and restaurants and is also delaying investments across the economy that impact the communities in which these companies are doing business," the businesses and groups said in a letter sent Tuesday to the top Republicans and Democrats on the congressional tax-writing committees. 

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The letter was signed by groups such as the National Retail Federation and Retail Industry Leaders Association, as well as by businesses such as Best Buy and Denny's.

The retail and restaurant industries have been generally supportive of the tax law, which cut the corporate tax rate from 35 percent to 21 percent. But they have been concerned about two drafting errors in the measure that they say need to be fixed.

One of the technical corrections sought by retailers and restaurants relates to how quickly they can write off the cost of renovations to their stores. The authors of the tax law intended for the businesses to be able to write off the full costs of the improvements in one year. But due to a drafting error, the retailers and restaurants instead have to write off the costs over the course of 39 years.

"This very 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 retailers and restaurants wrote.

The second technical correction sought by the businesses relates to the effective date of a provision that generally bans businesses from carrying back net operating losses to prior years. While lawmakers intended for the ban to take effect for taxable years starting after Dec. 31, 2017, the law instead says it applies for taxable years ending after Dec. 31, 2017. 

"The drafting error in the [net operating losses] provision imposes a retroactive tax increase on businesses that are in loss positions and already facing liquidity issues," the businesses and trade groups wrote.

The letter from retailers and restaurants follows a report from the Tax Foundation last week urging Congress to fix the glitch relating to renovation costs.

Businesses have been pushing to get their desired fixes attached to other legislation Congress takes up this year.

But it's unclear whether Congress will tackle technical corrections to the tax law this year since Democrats have expressed a reluctance to back fixing drafting efforts unless more substantive changes are made to the tax law.