Tax News

CCH (cch.taxgroup.com) reports:

  Small business owners urged lawmakers on September 11 not to adjourn without passing a package of tax extenders. Jobs could be lost if Congress fails to renew some popular but temporary tax incentives, such as the research tax credit, enhanced depreciation for leasehold and restaurant improvements and energy tax breaks, they warned. The business owners testified before the House Small Business Committee.

Stalled Legislation

  Although the House has passed a package of extenders (the Renewable Energy and Job Creation Bill of 2008 (HR 6049)), similar legislation has stalled in the Senate (the Jobs, Energy, Families, and Disaster Relief Bill of 2008 (Sen 3335)). Congress is anticipated to recess at the end of September or in early October, leaving little time to pass the extenders before the November elections.

  If Congress does not return for a lame-duck session after the November elections, the extenders may have to wait until 2009, some lawmakers have predicted. "We've got to move on this (the extenders)," Senate Finance Committee Chairman Max Baucus, D-Mont., said later on September 11.

Job Losses

  The extenders can "galvanize" the job market, said House Small Business Committee Chairman Nydia M. Velazquez, D-N.Y. "With unemployment at its highest point in five years, we could use that boost."

  The extenders not only impact the businesses that claim them, but also their customers, suppliers and others, Joseph E. Clements, speaking on behalf of the National Restaurant Association, explained. "The restaurant industry is projected to spend $70 billion over the next 10 years for building construction and renovation. Every $1 spent in the construction industry creates more than 28 jobs in the overall economy."

  Congress has authorized accelerated depreciation for restaurant and leasehold property several times since 2000. The most recent extension was in the Tax Relief and Health Care Act of 2006 (TRHCA) (P.L. 109-432), which extended the 15-year MACRS recovery period for qualified leasehold improvement property and qualified restaurant property. "As of January 1, 2008, all schedules reverted back to 39-1/2 years," Clements explained. "Most restaurants remodel and update their buildings every six to eight years - a much shorter timeframe than is reflected in the current depreciation schedule," Clements, who owns several restaurants in Louisiana, said.

  Jobs could also be lost in the energy industry, Manning Feraci, vice president of federal affairs, National Biodiesel Board, told lawmakers. Since enactment of the biodiesel excise tax credit, production of biodiesel jumped from 25 million gallons in 2004 to 500 million gallons in 2007. "Expiration of the incentive would have a catastrophic impact on the U.S. biodiesel industry," Feraci warned. The incentive is set to expire at the end of 2008.

  Failure to renew the research tax credit could encourage businesses to move work out of the U.S., Leo Berlinghieri, speaking on behalf of Semiconductor Equipment and Materials International (SEMI), cautioned. "The U.S. used to have the best research tax credit, and now we are way down the list as other countries have made this a priority, and the U.S. has not. Many countries, such as Canada, China and Ireland, have more attractive research tax incentives luring research jobs away from the U.S." The research credit expired at the end of 2007.

  By George L. Yaksick, Jr., CCH News Staff