Restaurants, Retailers Should Get Depreciation Deduction, NFIB Says

August 10, 2018

The Honorable Steven T. Mnuchin
Secretary of the Treasury
c/o CC:PA:LPD:PR (REG-104397-18)
Internal Revenue Service, Room 5203
Department of the Treasury
P.O. Box 7604, Ben Franklin Station
Washington, DC 20044

Dear Mr. Secretary:

RE: Comments on Internal Revenue Service Notice of Proposed Rulemaking titled “Additional First Year Depreciation Deduction,” Docket No. REG-104397-18, RIN 1545-BO74, 83 Fed. Reg. 39292 (August 8, 2018)

The National Federation of Independent Business (NFIB) submits these comments in response to the IRS notice of proposed rulemaking titled “Additional First Year Depreciation Deduction” (Notice) and published in the Federal Register of August 8, 2018. The Notice proposed rules to implement subsection 168(k) of the Internal Revenue Code (IRC), as amended by the Tax Cuts and Jobs Act (TCJA) (Public Law 115-97, December 22, 2017). In specified circumstances, subsection 168(k) allows businesses to deduct additional first-year depreciation on purchases, so as to allow deduction of 100% of the cost of qualified property placed in service after September 27, 2017, and before January 1, 2023. For qualified property placed in service in 2023 through 2026, the subsection 168(k) rate decreases to 80% for 2023, 60% for 2024, 40% for 2025, and 20% for 2026, reaching 0% for 2027 (each delayed by one year for long-production property and certain aircraft).

NFIB is an incorporated nonprofit association with about 300,000 small and independent business members across America. NFIB protects and advances the ability of Americans to own, operate, and grow their businesses and, in particular, ensures that the governments of the United States and the fifty states hear the voice of small business as they formulate public policies. With respect to rules implementing the TCJA, NFIB and its members have a substantial interest in minimizing, to the extent consistent with the law, the burdens of taxation and administration that inhibit business growth and job creation.

NFIB encourages the Department to reflect in the final rule, insofar as the law permits, the intention of Congress to extend the subsection 168(k) additional first-year depreciation deduction to qualified restaurant property that is qualified improvement property and to qualified retail improvement property, for the benefit of the restaurant and retail industries. In enacting the TCJA, Congress clearly intended to give businesses in the restaurant and retail industries the benefit of the additional first-year depreciation deduction along with other businesses. As the statement of managers associated with the legislation said, “qualified restaurant property is not eligible for the additional first-year depreciation deduction unless it also satisfies the definition of qualified improvement property" and “[q]ualified retail improvement property . . . is eligible for the additional first-year depreciation deduction if the other requirements of section 168(k) are met” (footnotes omitted). Tax Cuts and Jobs Act, Conference Report to Accompany H.R. 1, H.R. Rept. No. 115-466 (December 15, 2017), p. 366. Regrettably, the text of the statute reflected less than perfectly the intention stated clearly in the statement of managers.

The Notice explained (at 83 Fed. Reg. 39293, col. 3) the interaction of section 13204 of the TCJA and IRC subsections 168(e) and (k) and the Service's implementation of those provisions through the proposed new rule at 26 CFR 1.168(k)-2(b)(2)(A)(2) and (3). That proposed new rule facilitates the availability of the additional first-year depreciation with respect to qualified restaurant property that is qualified improvement property and qualified retail improvement property when they are acquired by a taxpayer after September 27, 2017, and placed in service before January 1, 2018. The proposed new rule will assist somewhat the restaurant and retail industries with respect to the additional first-year depreciation deduction while Congress pursues legislation to implement fully the intention it set forth in the TCJA statement of managers to give those industries the benefit of the additional first-year depreciation deduction that other industries may receive.

Most entities in the restaurant and retail industries are small businesses. In implementing the TCJA, the Department should make every effort within the law to ease the burden that taxes and the filing of tax returns impose on small businesses. NFIB appreciates the Department's continuing efforts to issue in a timely fashion regulations that assist in implementing the TCJA tax cuts.

Sincerely,

David S. Addington
Senior Vice President and General Counsel
National Federation of Independent Business
Washington, DC