Legislation that temporarily shortens the depreciation schedule for what restaurants spend to improve their buildings or construct new ones to 15 years makes sense, according to those in the restaurant industry and those members of Congress who have annually passed a one-year extension of the measure.
But U.S. Sen. Bob Casey thinks ending the temporary extensions and making the 15-year-depreciation treatment permanent makes more sense. So the Democrat from Scranton introduced a bipartisan-supported bill Wednesday that does just that.
Shorter depreciation costs reduce the capital costs to property owners, making them more likely to make improvements to the property. That could mean a boost to business and maintaining or increasing the payroll.
Dave Koenig, vice president of tax and profitability for the National Restaurant Association, lauded Casey’s efforts and said his group’s internal data show that, if passed, the bill would lead to 5,700 new jobs and $330 million in additional spending in Pennsylvania alone.
The measure has the support of Koenig’s association and the International Franchise Association.
Under current laws, owners of most commercial buildings including restaurants, depreciate the building’s original cost, plus the cost of subsequent building renovations and improvements, over 39½ years.
This means that for a building that costs $100,000, $2,564, or 1/39th of the cost, is written off in each of the subsequent 39 years. The shorter depreciation period allows owners to deduct a greater amount each year. For the same $100,000 building, the owners could deduct $6,667, which is 1/15th of the cost each year for the next 15 years. This gives business owners an incentive to make capital investments by reducing their cost, Casey argued.