Tax Reform Bill Praised as Victory for Retailers

WASHINGTON, D.C. — After 11 months in office, the first piece of legislation is arriving on President Trump's desk.

This week, the U.S. Senate and U.S. House of Representatives passed tax reform legislation, mostly along party lines. In the House, 12 Republicans, primarily from high tax states, voted no; and no Democrats voted in favor of the bill, explained NACS, the Association for Convenience & Fuel Retailing.

According to NACS, the bottom line for many companies is the new tax rates. For corporations, the package reduces the tax rate to 21 percent — up 1 percent from both the previous House and Senate versions but goes into effect immediately next year rather than being delayed by a year as the Senate bill had done.

For their part, pass-through entities seem to fare pretty well in the final version, the association said. The bill provides a deduction for qualified business income for pass-through taxpayers. The deduction is down to 20 percent and the final version also lowers the top personal income tax rate to 37 percent. 

"The result should put the marginal tax rates paid by pass-throughs fairly close to on par with the marginal tax rates paid by corporations," NACS said. "It's also important to point out that pass-throughs formally owned by estates and trusts are eligible for the tax deduction under the final version, marking a significant change from the Senate version."

According to the association, some issues important to the convenience store industry in the final package include:

• Work Opportunity Tax Credit (WOTC): The House version repealed WOTC while the Senate preserved it.  Fortunately, the final version follows the Senate and preserves the tax credit going forward.
• Last-In First-Out Accounting (LIFO): LIFO has been a popular target for raising revenue in recent tax proposals. Fortunately, like both previous versions, LIFO is left intact.
• Estate Tax:  While the House bill would have ultimately repealed the estate tax, the final package leaves it intact but does double the exemption amounts protecting many small businesses.
• Alternative Minimum Tax (AMT):  For individuals, the AMT is left in place but the thresholds are doubled.  The Corporate AMT is repealed.
• Individual Tax Rates: The final package follows closer to the Senate bill, setting up the following rates: 10 percent, 12 percent, 22 percent, 24 percent, 32 percent, 35 percent and 37 percent. They are scheduled to expire after 2025.
• State and Local Tax Deduction: Both previous versions ended up with a deduction limit of $10,000 for local property taxes. The final package includes the same monetary limit but allows for deduction of property taxes along with income or sales taxes.
• Standard Deduction: Is roughly doubled, just like both previous versions had done.

To read NACS' full rundown on how tax reform impacts c-store retailers, click here.

The National Retail Federation (NRF) also sees the reform as a win for retailers. The association has called on Congress for several years to eliminate tax breaks that benefit only some industries and to use the revenue saved to lower rates for all companies, including small businesses. 

"Passage of tax reform is a major victory for retailers who currently pay the highest tax rate of any business sector, and for the millions of consumers they serve every single day. Our priorities were clear: Reform must jumpstart the economy, encourage companies to invest here in the United States, increase wages and expand opportunities for employees, and protect our small business community, of which the vast majority are retailers,'' said NRF President and CEO Matthew Shay.

"That's exactly what this legislation will achieve. Most importantly, this historic tax reform will put more money in the pockets of consumers — the best Christmas gift middle-class Americans could ask for this holiday season," Shay added.