The National Retail Federation applauded Senate Finance Committee Republicans for clarifying the congressional intent of provisions of the federal tax reform law related to depreciation rules and “carryback” of operating losses. In a letter, the senators called on Treasury Secretary Steven Mnuchin and Internal Revenue Service Acting Commissioner David Kautter to reflect this congressional intent in any guidance they issue pertaining to these provisions and in the IRS enforcement of the law. The two errors in the law are costing the retail industry millions of dollars and delaying investments.
“For months, we’ve seen many retailers delay job-creating investments across the country due to the uncertainty caused by these drafting errors,” NRF Senior Vice President for Government Relations David French said. “We appreciate this effort to clarify the intent of these provisions and allow companies and their employees to realize the full benefits of historic tax reform. We urge Treasury and the IRS to issue guidance reflecting the intent of the law, as suggested by the committee, and we continue to call on Congress to work toward technical corrections legislation to provide a permanent solution.”
Under the Tax Cuts and Jobs Act, remodeling and other improvements to stores were supposed to be fully depreciated in the first year the work is done. Instead, a mistake in the legislative language requires that depreciation be done over 39 years.
Under a separate error, the legislation got the effective date of carryback eligibility wrong, resulting in a retroactive tax increase on businesses with losses, some of which are facing liquidity issues. The timing difference is critical to cash-strapped businesses that were counting on the carryback to finance continuing operations as well as investments needed to revitalize their businesses.
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