NGA supports tax policies that provide the opportunity for family-owned and privately-held grocers to grow and create American jobs. NGA supports policies that simplify the tax code and lower rates, while retaining deductions and provisions that encourage growth and investment in Main Street American business.
Expensing of Qualified Improvement Property
Due to four missing words in the Tax Cuts and Jobs Act of 2017 known as the “retail glitch,” the tax burden on a category of business investment called Qualified Improvement Property (QIP) was unintentionally increased for independent grocers. As a result, after the new tax law took effect, interior improvements to stores such as refrigeration units, ceiling tiles, electrical wiring, and shelving depreciated over 39 years instead of immediately as Congress had intended. NGA urged Congress for over two years to fix the retail glitch and succeeded after a long hard battle. Due to NGA’s efforts, over 300 House Members and over 60 Senators cosponsored standalone legislation addressing the issue. Ultimately, NGA secured a provision in the “Coronavirus Aid, Relief, and Economic Security” (CARES) Act to retroactively fix the retail glitch, thereby allowing grocers to have access to full and immediate expensing for qualified improvement property dating back to September 27, 2017. Click here to read NGA's press release on the CARES Act containing a technical correction to fix the retail glitch.
Lower Tax Rate
Supermarkets are a high tax industry with the majority of independent grocers operating on just 1 to 2 percent net profit margins. NGA member companies are American, family-owned companies that do not have the tax advantage of offshore profit shifting. Any reduction in the effective tax rate will significantly help these entrepreneurs hire additional staff, expand offerings, and upgrade their stores.
Rate Parity for Pass-Throughs and Corporations
Independent grocery stores are operated through a broad diversity of company structures including C-corporations, Employee Stock Ownership Plans (ESOPs), and pass-throughs. For the independent supermarket industry to remain a competitive engine of economic growth, it is critical that Congress ensure a level playing field for all businesses involved. NGA supports rate parity for pass-throughs and C-corporations. NGA supports “The Main Street Tax Certainty Act” (H.R. 216 / S. 1149), which would create permanency for the 20 percent deduction provided to pass-through businesses in the Tax Cuts and Jobs Act.
Last-In, First-Out (LIFO) Accounting Method
LIFO is an accounting method widely used in the supermarket industry, and most accurately matches the cost of goods sold to revenue and helps protect against price shocks. Independent grocers would be deeply affected by any change to this accounting method, especially if Congress considers a “recapture tax” on LIFO reserves because they are not sitting around in a bank account; the reserves have already been reinvested in the business.
Interest Expense Deduction
The ability to deduct interest is a key tool that Main Street grocers use to offset the cost of critical investments in equipment and machinery, and it encourages expansion and growth in the industry overall.
The grocery business requires a heavy amount of investment in advertising to compete and maintain a robust customer base. Advertising is often one of our highest business expenses, so its deductibility is critical to robust competition within the industry.
NGA supports repeal of the estate tax so family-owned grocers can pass their operation to the next generation. NGA supports S. 215 and H.R. 218, legislation to repeal the estate tax.
Work Opportunity Tax Credit (WOTC)
WOTC is an important provision for independent grocers and it helps encourage the hiring of certain “at risk” groups that have faced significant barriers to employment.
New Markets Tax Credit (NMTC)
NGA supports NMTC because it helps incentivize investment in low-income areas, which are often populated by independent grocery stores.
Alternative Minimum Tax (AMT)
NGA supports elimination of the punitive corporate AMT, which serves only to create complexity in the tax code and would stymie tax reform’s pro-growth effects.