The Depreciation Fairness Coalition, led by the National Restaurant Association, sent a letter to each member of the U.S. Congress urging an extension of the 15-year depreciation schedule for restaurant improvements and new construction, leasehold improvements, and retail improvements that is set to expire at the end of 2009. The Coalition says that a seamless extension is essential to provide businesses with the certainty they need to undertake capital expenditures, which are critical to fueling economic activity and creating jobs.
"Without Congressional action, the depreciation schedule will revert back to 39 years, which would greatly discourage capital expenditures for restaurants," says Beth Johnson, executive vice president of public affairs for the National Restaurant Association. "The failure to act now would be extremely shortsighted and inhibit job creation at a key moment. As the economy begins the process of recovery, businesses need the resources necessary to make investments, hire and retain workers, and, in certain cases, keep their doors open."
According to a National Restaurant Association survey, 42 percent of restaurant operators are considering making a capital expenditure for equipment, expansion, or remodeling in the next six months. The ability to plan for these expenditures and know what the tax treatment will be in subsequent years is important to those who are making those decisions.
The letter states that extending the depreciation schedule is an important driver of economic activity and job creation. According to the Bureau of Economic Analysis, every dollar spent in the construction industry generates an additional $2.39 in spending in the rest of the economy and every $1 million spent in the construction industry creates more than 28 jobs in the overall economy. That means that restaurant industry construction spending, which amounted to $10.4 billion in 2007, created 280,000 jobs in the overall economy in that year alone.
Last month, National Restaurant Association member John Frenz testified at a hearing of the U.S. House of Representatives Small Business Committee on "Expiring Tax Incentives: Examining Their Importance for Small Businesses on the Road to an Economic Recovery." Frenz is CEO of Frenz & Schmidtknecht, which owns and operates two Montana Mike's Steakhouse restaurants, located in Vincennes, Indiana, and Danville, Illinois. In his testimony, Frenz encouraged the Committee to extend several tax provisions set to expire before the end of this year, including the 15-year depreciation schedule.
"After owning and operating restaurants for nearly 30 years, I understand how important it is for Congress to act now," Frenz told lawmakers. "Extending these expiring tax provisions will make a real difference to the 945,000 restaurant locations across the country. The impact on their bottom line will be evident, and will be good for the economy as a whole."
The Depreciation Fairness Coalition is a group of restaurants, trade associations, and other organizations that support permanent extension of the 15-year depreciation schedule for restaurant improvements and new construction, leasehold improvements, and retail improvements.