WASHINGTON — The National Retail Federation joined nearly 300 organizations ranging from restaurants and grocers to building contractors and firefighters today in urging Treasury Secretary Steven Mnuchin to follow congressional intent and issue guidance resolving errors in the 2017 tax reform law related to depreciation rules and “carryback” of operating losses.
“The delay in correcting these provisions has caused economic hardship (that is) delaying investments across the economy that impact the communities in which these companies are doing business,” the groups wrote in a letter. “We urge the Treasury Department to issue guidance that will assure that these provisions are administered as intended by Congress.”
In addition to economic impact, the letter said the drafting errors have raised safety concerns by delaying projects such as upgrading sprinkler systems, “creating a more perilous situation for our nation’s firefighters."
The need to correct the errors is becoming urgent because most retailers must file their first income tax returns related to the change on November 15, the letter said. A national chain may file as many as 100 federal, state and local income tax returns and, if the errors are not corrected before then, could have to file 100 amended returns after the mistakes are fixed. Such a time-consuming and costly process would be antithetical to the White House’s 2017 executive order to reduce tax regulatory burdens.
Under the Tax Cuts and Jobs Act, remodeling and other improvements to stores or buildings 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.
Key lawmakers have acknowledged that both provisions were unintended drafting errors inconsistent with congressional intent. Last week, Senate Finance Committee Republicans called on Mnuchin and Internal Revenue Service Acting Commissioner David Kautter to reflect congressional intent in any guidance they issue pertaining to the provisions.
The National Retail Federation is the world’s largest retail trade association. Based in Washington, D.C., NRF represents discount and department stores, home goods and specialty stores, Main Street merchants, grocers, wholesalers, chain restaurants and internet retailers from the United States and more than 45 countries. Retail is the nation’s largest private-sector employer, supporting one in four U.S. jobs — 42 million working Americans. Contributing $2.6 trillion to annual GDP, retail is a daily barometer for the nation’s economy.