One of several errors in the law has prevented retail businesses from writing off renovations as the law’s authors intended.
Instead of allowing businesses to deduct the full cost of “qualified improvement property” upgrades, a drafting error only lets them write those investments off little by little over 39 years. Retailers and restaurants say they’ve held off on renovations, and they’ve been lobbying hard for a solution.
The glitch “is causing numerous negative ripple effects for individuals and businesses,” a group of hundreds of businesses told lawmakers in an April letter.
Democrats have hinted they might try to pair a fix for the so-called “retail glitch” with increasing tax credits for people with low incomes.
“We’re not going to give restaurant owners in big corporate restaurant chains a tax break and then not help the workers who are underpaid to work in those restaurants,” Sen. Sherrod Brown (D-Ohio), a member of the Senate Finance Committee, told HuffPost.
The 2017 Tax Cuts and Jobs Act reduced taxes for most households, but slashed rates for corporations. Democrats have complained since its passage that Republicans left out a number of potential tax benefits for low-income households.
Earlier this year the House Ways and Means Committee approved a bill that would expand the Child Tax Credit and the Earned Income Tax Credit, which dishes out cash refunds to millions of households every year. The bill has not passed the House, but the Center on Budget and Policy Priorities, an influential liberal think tank, said in an October blog post that Democrats ought to insist on changes like that in exchange for helping retailers.
A Ways and Means spokeswoman said that if Congress fixes errors in the law, then it should fix its more “fundamental” problem: “that it rewarded big corporations and the wealthiest Americans while leaving workers and middle-class families behind.”
Normally, a Democratic bill for the working poor would have no chance in a Republican-controlled Senate generally hostile to new low-income tax credits. But Republicans are desperate to fix errors in the tax bill, their biggest legislative accomplishment under Trump. It’s not clear how hard Democrats will push, but there’s definitely an opportunity for them to get something. A catchall tax package addressing the retail glitch and providing a few other tax breaks could hitch a ride on whatever spending bill Congress passes before the end of the year in order to avoid a government shutdown.
Sen. Ron Wyden (D-Ore.), the top Democrat on the Senate Finance Committee, which writes tax laws, declined to specify what Democrats might bargain for, saying he didn’t want to negotiate in public.
“Every day you just see another mess created by the fact that they just went headlong into important legislation and now you pick up the pieces,” Wyden said, pointing to a deepening controversy over so-called opportunity zones ― a scheme whereby designated areas are supposed to benefit from tax breaks for wealthy investors.
Last year, Democrats agreed to fix another mistake known as the “grain glitch” in exchange for an expanded low-income housing development tax credit. But Democrats have been wrangling over the retail fail, as well a mistake that socked grieving military families with absurd tax bills, and a slew of expired corporate writeoffs known as “tax extenders,” which were omitted from the new tax law.
Two other Democrats on the Finance Committee said they supported fixing the retail glitch as part of a broader package.
A House bill from Rep. Jimmy Panetta (D-Calif.) that would address the problem has been steadily racking up bipartisan cosponsors ― but for some lawmakers, the tax problem raises a labor problem.
In June, a group of 14 Democrats wrote to Red Rock Resorts, one of the companies that has lobbied for a glitch fix, noting that its subsidiary has refused to bargain with its workers at the Palms Casino Resort in Nevada, who voted to join the Culinary Union last year.
While taxpayers that the tax law has negatively affected deserve to be heard, the Democrats wrote, “We also believe that employees at your facilities deserve a chance to make their voices heard.” They demanded to know whether the company had plans to bargain with its workers.
In a statement, Red Rock Resorts did not address the labor issue, saying instead that Congress needs to fix its tax code screwup. “As a leader in the resort gaming industry, as well as one of the largest Nevada employers, we are constantly reinvesting in our properties and creating significant quality jobs,” a company spokesman said.
Unite Here, the Culinary Union’s parent organization, is mad that Democrats are considering what would essentially be a huge tax break for Red Rock Resorts. The company recently undertook a $690 million renovation to its Station Casinos chain, an upgrade that would probably qualify for a massive tax deduction if the tax law gets fixed.
The union said it plans to air a TV ad in Panetta’s district complaining that his bill would shower money on Frank and Lorenzo Fertitta, the billionaire brothers and GOP megadonors who own a controlling stake in Station Casinos.
Panetta “needs to explain to his constituents why he is sponsoring a bill that rewards billionaires who have already reaped millions from Trump’s first tax cut,” Unite Here president D. Taylor said in a statement.
This has been updated with comment from a Ways and Means Committee spokeswoman.