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Tax Reform

Position: SUPPORT REFORM THAT BENEFITS SMALL BUSINESS OWNERS
Status: EXTENDERS PASSED THROUGH 2014; PERMANENT EXTENSIONS TO BE INTRODUCED

History
Last year, Congress failed to pass a tax package which would include extensions for the Work Opportunity Tax Credit (WOTC), 15-year restaurant depreciation schedules and 179 expensing, among other provisions. In the House, the Ways and Means Committee supports an individual review of each tax extender in regards to a permanent extension.

On Dec. 16, 2014, by a vote of 76-16, Congress passed and the president signed a bill that retroactively extends a number of expired tax provisions for 2014. Included in the bill is a retroactive extension of the 15-year depreciation provision for restaurant improvement, new construction, retail improvements and leasehold improvements. Also included is an extension of the Work Opportunity Tax Credit, which gives employers incentives to hire from certain targeted groups of job seekers.

Unfortunately, the extensions are only retroactive for one year (i.e., through the end of 2014). This means the NFA will continue to fight for longer-term extensions not only in 2015, but until these and other pro-business provisions are made permanent

Summary
15-year Depreciation: The 15-year depreciation schedule for qualified leasehold improvements, qualified restaurant property and qualified retail improvement property has been retroactively extended for property placed in service through Dec. 31, 2014. NFA supports legislation which makes the 15-year depreciation schedules permanent for renovations, improvements and new construction. By shortening the depreciation schedule, Congress gives operators cash flow to reinvest in their businesses and to create more jobs.

Work Opportunity Tax Credit (WOTC): WOTC gives employers incentives to hire from certain targeted groups of job seekers by providing a federal income tax credit equal to 40 percent of the first $6,000 in first-year wages. WOTC expired on Dec. 31, 2014. The NFA supports a permanent extension of WOTC, as it would motivate franchisees and small business owners to hire more employees, while helping more disadvantaged workers transition toward self-sufficiency.

Section 179 Expensing and Bonus Depreciation: The Act extends Section 179 limit enhancements t0 $500,000, as well as 50 percent bonus depreciation for qualifying property purchased and placed in service through Dec. 31, 2014. As of 2015, however, bonus depreciation is eliminated and Section 179 expensing reverts to a $25,000 limit with a $200,000 investment ceiling.

Position
The NFA supports a permanent 15-year depreciation schedule for restaurants as well as a permanent extension of the WOTC. Tax incentives like these and lowered corporate and individual tax rates would increase investment and stimulate job growth.