NRF Asks Congress to Renew Law Making it Easier to Remodel Retail Stores

WASHINGTON — The National Retail Federation today urged the House to pass legislation that would extend a four-year-old law that has made it easier for retailers to remodel some of their stores, saying the help is needed more than ever in the current economy and needs to be expanded to all stores.

Retailers generally remodel their stores every five to seven years in order to maintain customer interest and to compete with newer stores, NRF Senior Vice President for Government Relations Steve Pfister said. In the current economic climate, some retailers look at remodeling as a way to revitalize a failing store, but the anticipated return has to pay for the costs involved. When the costs must be written off over nearly four decades, it is much more difficult to make the decision to remodel.

Pfister s comments came in a letter to members of the House, which is scheduled to vote today on H.R. 6049, the Energy and Tax Extenders Act of 2008. Sponsored by Ways and Means Committee Chairman Charles Rangel, D-N.Y., the bill would retroactively renew about three dozen tax provisions that expired at the end of 2007, along with a number of energy-related tax incentives scheduled to expire at the end of 2008.

Of key interest to retailers is a provision first passed in 2004 that allows retailers who lease their stores to depreciate remodeling and other improvements over 15 years rather than the previous 39 years, resulting in a significant tax savings that makes the work more economically feasible. The provision expired December 31, 2007, but the Rangel legislation would renew it retroactively and extend it through December 31, 2008.

NRF has long argued that the 39-year period is unrealistic because successful retailing requires periodic updates to maintain a fresh look, and also because of the need for general improvements such as energy-saving efforts. If retailers waited 39 years to remodel, stores frequented by shoppers today would still look the same as they did in 1969.

The 15-year period applies only to stores that are leased, but NRF asked that it be expanded to stores that are owned as well. Restaurants are already allowed to depreciate improvements over 15 years regardless of whether buildings are owned or leased, and would also see the provision renewed under the legislation.

In many cases, the retailers that own their buildings are small businesses, and they are placed at a competitive disadvantage compared with retailers that lease their stores, Pfister said. Before the legislative process with H.R. 6049 is complete, we hope that Congress will be able to fix this discrepancy in the law.

NRF also supports energy-related provisions in the bill, including renewal of the investment tax credit for solar energy, which would benefit retailers who use solar panels on the roofs of their stores or warehouses, along with incentives for energy efficient products and for energy conservation in commercial buildings.

NRF also supports renewal of a provision that gives taxpayers the option of deducting state and local sales taxes on their federal tax returns in lieu of deducting state income taxes. The provision gives a tax break to consumers in states without an income tax, leaving them with more discretionary income to potentially spend in stores.

The National Retail Federation is the world’s largest retail trade association, with membership that comprises all retail formats and channels of distribution including department, specialty, discount, catalog, Internet, independent stores, chain restaurants, drug stores and grocery stores as well as the industry’s key trading partners of retail goods and services. NRF represents an industry with more than 1.6 million U.S. retail companies, more than 25 million employees – about one in five American workers – and 2007 sales of $4.5 trillion. As the industry umbrella group, NRF also represents over 100 state, national and international retail associations. www.nrf.com

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