The National Grocers Association (NGA) has released the following statement from NGA president Greg Ferrara on Congress’ lack of action to resolve the retail glitch, a drafting error in the Tax Cuts and Jobs Act (TCJA) of 2017.
“NGA is disappointed that Congress failed to fix the retail glitch, a flaw in the tax law that prevents independent grocers from making important investments in their stores. The supermarket industry is a competitive marketplace and main street grocers deserve the full benefits of tax reform intended by Congress. NGA will continue to advocate for a fix to the retail glitch so that independent grocers can invest in their businesses and communities for years to come.”
Congress intended to help retailers invest in their businesses with the inclusion of this provision. The TCJA included a provision providing businesses with a 100 percent bonus depreciation to be used to write off the full costs of short-lived investments immediately.
However, due to a drafting error, some categories of business investment, most notably qualified improvement property, or “QIP,” were excluded from being 100 percent eligible for bonus depreciation. Due to this error, retailers making investments to improve their stores now face a more restrictive cost recovery period that is twice than under the prior law.
According to NGA, Congress inadvertently failed to include QIP improvements for bonus depreciation, which would have increased the total deduction from 50 to 100 percent of the cost of the upgrades. Worse, they also accidentally raised the QIP depreciation period from 15 to 39.5 years.
Andy Harig, vice president, tax, trade, sustainability & policy development for the Food Marketing Institute, expressed dissatisfaction that this oversight in the tax code has prevented retailers from implementing operational improvements inside their businesses and facilities, which Congress always intended for grocers to do in the tax reform legislation.
“Since 2017, many qualified improvements to grocery stores and supermarkets have been put on hold due to a drafting error in the Tax Cuts and Jobs Act that make these investments more expensive than before tax reform,” Harig said. “The drafting error actually increases costs and discourages companies from making these types of investments, which affects economic activity in communities and impacts customer experience. We have paid an extraordinary political price on this issue that impacts every business improvement plan across all congressional districts.”