national restaurant association backs new bill

House representatives try to accelerate depreciation schedule to help foodservice proprietors.

The National Restaurant Association is praising the introduction of a House bill aiming to address the tax code’s unfairness towards restaurants. The bill would make permanent the accelerated depreciation schedule of 15 years for both new building construction and improvements for restaurants across the U.S. Reps. Kendrick Meek (D-FL-17) and Pat Tiberi (R-OH-12) are the lead cosponsors of this bipartisan bill, along with eight additional cosponsors.

“The nation’s 935,000 restaurant locations will serve over 70 billion meals and have an overall economic impact of more than $1.3 trillion in 2007,” said Peter Kilgore, acting interim president and CEO of the association. “By allowing restaurateurs to deduct the cost of new construction and renovations on a shorter schedule, this legislation will help restaurateurs to grow their businesses and create more jobs. We applaud Reps. Meek and Tiberi for their leadership on this top priority industry issue.”

“The bill would also allow more people to realize their dream of opening their own restaurant, an opportunity more women and minorities are seizing,” said Kilgore. “Between 1997 and 2004, ownership of eating-and-drinking places grew 77% among African-Americans, 30% among Latino-Americans, 25% among Asian-Americans, and 28% among women; while the national average was just 16% growth.”

Under current tax laws, owners of most commercial buildings—restaurants included—depreciate the building’s original cost, plus the cost of subsequent building renovations and improvements, over 39 years. Recognizing that some businesses suffer particularly heavy daily wear and tear, Congress has sped up the depreciation schedule for certain businesses, but not for restaurants. Operators believe this is unfair for the restaurant industry, where buildings are updated, on average, every six to eight years. Restaurants have a high customer traffic volume and maintain longer hours than the average commercial business.

“In order to compete restaurants need to upgrade their facilities often. It makes no sense to force them to use a 39 year depreciation schedule when they need to improve their property more often to stay in business and serve their customers,” said Rep. Meek, who added, “It is also time to treat owner-occupied restaurants the same way as we treat leasehold restaurants, gas stations and convenience stores, who compete with the owner-occupied restaurants for business.”

“This measure will level the playing field among restaurants, convenience stores, and gas stations while it simplifies and equalizes the tax code,” said Rep. Pat Tiberi, the Republican sponsor of the bill and a member of the Ways and Means Committee. “Constant wear and tear on restaurants requires frequent upgrades and this bill will help these businesses better compete while creating more jobs in our communities.”

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