NACS Board Member Ray Huff testified on tax policy during a hearing of the House Small Business Committee on Wednesday. Testifying on behalf of himself and NACS, Huff said that the tax deduction for pass-through businesses and the bonus depreciation provision of the 2017 Tax Cuts and Jobs Act should both be made permanent. Without new legislation, both of those provisions would expire after 2025.
“Small businesses need those benefits into the future and would benefit tremendously from certainty regarding their future tax treatment,” Huff testified. “For those reasons, the section 199A deduction, bonus depreciation and other beneficial provisions of the Tax Cuts and Jobs Act should be extended and made permanent to provide small businesses with the foundation and certainty they need to invest and thrive.”
The deduction for pass-through businesses, also known as the section 199A deduction due to the part of the Tax Code in which it appears, provides a 20% deduction in business income for pass-through businesses when paying their taxes. The bonus depreciation provision allows businesses to depreciate 100% of investments in technology, equipment and buildings in the year those investments are made. The two provisions work together to free up capital and incentivize businesses to invest that capital.
Huff focused on his personal story to illustrate the need for these tax benefits. “Initially, the reduction in tax burden from section 199A allowed me to reinvest in my business, expand to open new stores and hire more employees. It did what it was intended to do—it created a level playing field. That level playing field is better for my employees and customers.”
In response to questions from Representatives Mark Alford (R-MO) and Marc Molinaro (R-NY), who asked about the impact of 199A expiring, Huff informed the committee that if section 199A is not renewed, “I will not be able to invest into my plan of reopening some of my stores. This was the first time I felt like the tax code was aimed at me. We reinvest in our business … Without section 199A, I project that I’ll only be able to open one or two stores in the next two years rather than roughly nine.”
Representative Marie Gluesenkamp Perez (D-WA) queried Ray about his use of proceeds from the tax deduction and use of bonus depreciation. “The purchasing of coolers, fixtures and point of sales systems, all of those create jobs … As I open stores, I have to hire managers, assistant managers and associates. It’s critical that we continue to come up with tax policies that allow small businesses to grow. That’s where the growth in employees comes from.”
All of the witnesses at the hearing agreed with Huff that the two tax provisions should be extended and made permanent—a rare showing of unanimity for a Congressional hearing. The hearing and the testimony provided a strong boost to NACS’ advocacy in favor of making the tax provisions permanent.
Huff was not the only member of the NACS Board of Directors to have his voice heard in Washington this week. On Monday, Don Rhoads, President of the Convenience Group, LLC, and Annie Gauthier, Co-CEO & CFO of St. Romain Oil Company, participated in a call with staff from the Office of Management and Budget and U.S. Department of Labor to share their views on the negative impacts that the DOL’s proposal to dramatically increase the salary threshold in the federal overtime rule would have on small businesses and their employees. Rhoads talked about the challenges he’s had in Washington State, which has already instituted a high salary threshold. Gauthier shared some of the planning and actions her company had to take in 2015 when DOL last tried to increase the threshold. She noted that the changes were not wanted or appreciated by her employees.
OMB review of regulatory proposals like the overtime rule change is the last step in the regulatory process before a new rule can be finalized. There is no set deadline for when the review will be complete, but it is expected in the coming weeks.