Restaurant Recovery Update 9.15.20
Massachusetts Announces Extension of Administrative Tax Relief for meals and occupancy tax due on 9/20
Governor Charlie Baker, Lt. Governor Karyn Polito, Senate President Karen Spilka and House Speaker Robert DeLeo today announced an extension of administrative tax relief measures for local businesses in the restaurant and hospitality sectors. 
This includes the extension of the deferral of regular sales tax, meals tax, and room occupancy taxes for small businesses due from March 2020 through April 2021, so that they will instead be due in May 2021.

Businesses that collected less than $150,000 in regular sales plus meals taxes in the twelve month period ending February 29, 2020 will be eligible for relief for sales and meals taxes, and room occupancy taxes. For these small businesses:
  • no penalties or interest will accrue during this extension period.
For businesses with meals tax and room occupancy tax obligations greater than $150,000 in regular sales plus meals taxes, or room occupancy taxes in the twelve month period ending February 29, 2020 that do not otherwise qualify for this relief:
  • late-file and late-pay penalties will be waived during this period
  • please know that interest has not been waived

2020 Tax Planning
First in a series of articles written by our friends at the Antares Group designed to get you thinking about important 2020 tax implications.

Qualified Improvement Property
Many restaurateurs have, and will continue to, reconfigure restaurant space, kitchens, lobbies and entryways to conform with COVID-19 social distancing and safety guidelines. These investments, albeit necessary, can be costly. Fortunately, the CARES Act includes a retroactive correction to the legal language of the 2017 Tax Cuts and Jobs Act (TCJA). The correction allows business owners to depreciate this qualified improvement property (QIP) that has been placed in service after the TCJA became law, at a much quicker pace.

Specifically, the correction allows 100% first-year bonus depreciation for QIP that is placed in service in 2018 through 2022. That is because QIP placed in service after 2017 is now eligible for a 15-year cost recovery period instead of a 39-year cost recovery period.

QIP is generally defined as any improvement to an interior portion of a nonresidential building that is placed in service after the date the building was first placed in service.
QIP includes the installation or replacement of drywall, ceilings, interior doors, fire protection, mechanical electrical and plumbing, and other items.

However, QIP does not include any expenditures attributable to:
· The enlargement of the building,
· Any elevator or escalator, or
· The building's internal structural framework.

If you have performed major reinvestment or additions to your building, a cost segregation study would be highly advantageous for you. If your business will be unprofitable this year due to the COVID-19 crisis, deductions for 100% first-year bonus depreciation can create or increase a net operating loss (NOL) for 2020.

Some businesses that used a 39-year recovery period for QIP may instead opt to depreciate QIP over 15 years rather than claiming 100% first-year bonus depreciation. This could be a smart move if, for example, you expect tax rates to be higher in the future or if your business operates as a pass-through entity (such as a partnership, limited liability company or S corporation) and taking 100% bonus depreciation will cause you to miss out or reduce the deduction for qualified business income (QBI). Your tax advisor can advise you about the pros and cons of claiming bonus depreciation vs. depreciating QIP over 15 years.

Massachusetts Restaurant Association
160 East Main Street, Suite 2, Westborough, MA 01581
Phone: (508) 303-9905