Tax Reform

 

Comprehensive tax reform - reform that addresses both corporate and individual rates - continues to be a top legislative priority. Simply reforming corporate tax rates is insufficient since more than 80 percent of franchise businesses report their business income on personal tax returns. IFA is a leader in pushing for these reforms and continues to work with policymakers to ensure the interests of both franchisees and franchisors are represented as the tax code is revised.

In the absence of comprehensive reform which lowers statutory rates, IFA has identified several temporary tax provisions that should be extended or made permanent to help franchise small businesses expand and hire.

  • 15-Year Accelerated Depreciation for Leasehold Improvements – Congress temporarily expanded the list of property subject to an accelerated 15-year depreciation schedule to include new restaurant, retail, and other leasehold improvements. The accelerated depreciation schedule, which was previously set at 39 years, allows business owners to more quickly write off the value of those improvements on their taxes, and reduces the total cost of large capital expenditures. This provision provides needed working capital for small businesses and helps them expand. This provision must be renewed.
  • Bonus Depreciation – At times, Congress has authorized additional depreciation deductions to encourage additional business re-investment. At the end of 2014, Congress again extended bonus depreciation through the end of 2014 for qualifying personal business property and through 2015 for certain longer life property, but only at the 50 percent level.
  • Work Opportunity Tax Credit – The Work Opportunity Tax Credit (WOTC) is a federal tax credit incentive that Congress provides to private-sector businesses for hiring individuals from nine target groups who have consistently faced significant barriers to employment, including long-term recipients of public assistance, youth seeking summer employment, and veterans.
  • Estate Tax – The Estate Tax, sometimes referred to as the “Death Tax,” is a tax imposed on the transfer of taxable estate of a deceased person, including businesses the deceased person may have owned. The federal government exempts a certain amount of estate from this tax. The January 2013 “Fiscal Cliff” deal made an expanded exemption and lower top rate permanent, and there appears to be some appetite in Congress for repealing the Estate Tax altogether.

For more information contact Elizabeth Taylor, Vice President of Government Relations, Public Policy & Counsel at etaylor@franchise.org.

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