Tax relief for remodels and improvements

Two bills passed by a key House committee would help retailers save on store remodeling and improvement costs upfront.

The bills, passed by the House of Representatives’ Ways and Means Committee on, would help retailers remodel their stores by make tax incentives for remodeling and new capital improvements permanent.

The National Retail Federation called on the House to quickly pass the two pieces of legislation that would make the tax provisions permanent.

“Retailers update or remodel their stores every five to seven years to remain competitive, but the high after-tax cost of making these investments often delays these much-needed updates,” NRF senior VP David French. “These bills would provide important investment incentives that would spur our sluggish economy.” –

The first of the two measures, the “Restaurant and Retail Jobs and Growth Act,” would make permanent a measure permitting “bonus depreciation,” which allows retailers to write off the cost of remodeling or make improvements to their stores over 15 years instead of the standard 39-year period for buildings.

The second bill would make permanent a provision that allows businesses that make capital investments, including leasehold improvements, to deduct half the cost immediately and then depreciate the remainder over the appropriate period. In addition, it would expand the provision to include owned stores rather than only leased stores.

Both provisions were in place on a temporary basis until they expired at the end of 2014, but would be renewed retroactively under the legislation and become a permanent part of tax law. If approved by the full House and Senate, the tax provisions would be renewed retroactively and become a permanent part of the tax law.

The two measures are important, the NRF said, because they make remodeling more affordable by providing upfront a greater portion of the tax benefits offered to businesses for making renovations.

As an example, under current law, if a store spent $500,000 on expanding its showroom, it would only be allowed to deduct less than $13,000 of the expansion costs in the first year, with depreciation spread out over nearly four decades.

However, under the two proposed bills, the same store would be allowed to deduct $250,000 from its tax bill the first year and then spread out the remaining $250,000 over the next 14 years, freeing up more money early on for further investment.

Retailers to get tax relief for store remodels/improvements? BY MARIANNE WILSON September 18, 2015