Cook County Sweetened Beverage Tax Ordinance
This past summer, the Cook County Sweetened Beverage Tax Ordinance went into effect after challenges and attempts to halt the tax’s implementation. The tax impacted retail sales of sweetened beverages by charging a rate of $0.01 per ounce on such purchases. However, the tax lasted only a few months and has been repealed effective December 1, 2017. In addition to lowering costs for consumers, the repeal will ease the burden placed on retailers who had to collect, report and remit the tax. Advocates of the tax cited potential health benefits and anticipated revenue that was expected to help close the gap in Cook County’s budget.
Proposed Tax Reform
The Tax Cuts and Jobs Act was recently introduced to the House of Representatives, paving the way for federal tax reform. While the specifics are still being debated and it is unclear whether or not the bill will have enough votes to pass Congress, below are two of the proposed changes that could impact the restaurant industry:
1. Increased Business Expensing
Allows accelerated expensing on eligible property.
- 2017 Rules
Section 179 – Limited to $510,000 per year on eligible property, phasing out dollar-for-dollar when the cost of eligible property placed in service exceeds $2,030,000.
Bonus Depreciation – Requires the eligible property to be a new asset and limits bonus depreciation to 50% of the asset’s cost. Under the Protecting Americans from Tax Hikes Act (PATH), the applicable bonus percentage is set to decrease to 40% in 2018 and 30% in 2019.
- Proposed Changes
Both the House and Senate appear to be in favor of increased expensing for certain capital investments (up to 100%) with a focus on the first five years, set to end prior to January 1, 2023.
2. Modifications to the Federal Insurance Contributions Act (FICA) Tip Credit
Provides a credit to employers on FICA taxes paid in relation to tips received by employees in certain industries.
- 2017 Rules
Uses the minimum wage as of January 1, 2007 to calculate tips eligible for the credit.
- Proposed Change
Modifies the calculation of the credit to incorporate the current minimum wage, which sets a higher bar and leads to less eligible tips. Additionally, changes are proposed to Form 8027, Employer’s Annual Information Return of Tip Income and Allocated Tips.