[Congressional Record Volume 152, Number 106 (Thursday, August 3, 2006)]
[Senate]
[Pages S8817-S8818]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Ms. SNOWE (for herself, Mrs. Lincoln, Mrs. Hutchison, and Mr. 
        Kerry):
  S. 3806. A bill to amend the Internal Revenue Code of 1986 to provide 
a shorter recovery period for the depreciation of certain improvements 
to retail space; to the Committee on Finance.
  Ms. SNOWE. Mr. President, I rise today to introduce a bill that will 
provide relief and equity to our Nation's 1.5 million retail 
establishments, most of which have less than five employees. This 
legislation is one in a series of proposals that, if enacted, will 
reduce both the amount of taxes that small businesses pay, but also the 
administrative burden that unfairly saddles them as they attempt to 
comply with our Nation's tax laws.
  The proposal reduces from 39 to 15 years the depreciable life of 
improvements that are made to retail stores that are owned by the 
retailer. Under current law, only retailers that lease their property 
are allowed this accelerated depreciation, which means it excludes 
retailers that also own the property in which they operate. My bill 
simply seeks to provide equal treatment to all retailers.
  Before I talk about the specifics of this particular provision, let 
me first explain why it is so critical that we begin evaluating how we 
can best reform the Tax Code, which increasingly keeps our small 
businesses trapped in a paralyzing state of regulatory limbo. As is 
well-known small businesses are the foundation of our Nation's economy. 
According to the Small Business Administration, small businesses 
represent 99 percent of all employers, employ 51 percent the private-
sector workforce, and contribute 51 percent of the private-sector 
output.
  Despite the fact that small businesses are the real job-creators for 
our Nation's economy, the current tax system imposes large and 
expensive requirements in terms of satisfying their reporting and 
recordkeeping obligations. This is a problem Congress must address 
because small companies are disadvantaged most in terms of the money 
and time spent in satisfying their tax obligation. Why create 
distractions for them as they simply seek to comply with the law?
  For example, according to the Small Business Administration's Office 
of Advocacy, small businesses spend an astounding 8 billion hours each 
year complying with government reports. They also spend more than 80 
percent of this time on completing tax forms. What's even more 
troubling is that companies that employ fewer than 20 employees spend 
nearly $1,304 per employee in tax compliance costs; an amount that is 
nearly 67 percent more than larger firms.
  These statistics are disturbing for several reasons. First, the fact 
that small businesses are being required to spend so much money on 
compliance costs means they have fewer earnings to reinvest into their 
business. This, in turn, means that they have less money to spend on 
new equipment or on worker training, which unfortunately has an adverse 
effect on their overall production and the economy as a whole.
  Second, the fact that small business owners are required to make such 
a sizeable investment of their time into completing paperwork means 
they have less time to spend on doing what they do best--running their 
business and creating jobs.

  Let me be clear that I am in no way suggesting that small business 
owners are unique in having to pay income taxes, and I am certainly not 
expecting them to receive a free pass. What I am

[[Page S8818]]

asking for, though, is a change to make the Tax Code fairer and simpler 
so that small companies can satisfy this obligation without having to 
expend the amount of resources that they do currently.
  For that reason, the package of proposals that I have introduced will 
provide not only targeted, affordable tax relief to small business 
owners but also simpler rules under the Tax Code. By simplifying the 
Tax Code, small business owners will be able to satisfy their tax 
obligation in a cheaper, more efficient manner, allowing them to be 
able to devote more time and resources to their business.
  Specifically, the proposal that I am introducing today will simply 
conform the tax codes to the realities that retailers on Main Street 
face. Studies conducted by the Treasury Department, Congressional 
Research Service and private economists have all found that the 39-year 
depreciation life for buildings is too long and that the 39-year 
depreciation life for building improvements is even worse. Retailers 
generally remodel their stores every 5 to 7 years to reflect changes in 
customer base and compete with newer stores. Moreover, many 
improvements such as interior partitions, ceiling tiles, restroom 
accessories, and paint, may only last a few years before requiring 
replacement.
  Mr. President, this legislation is a tremendous opportunity to help 
small enterprises succeed by providing an incentive for reinvestment. 
Every Member of this body has small retail constituents in small towns 
who may be in buildings that they have owned for generations and are 
struggling to compete. I urge my colleagues to join me in supporting 
this vital legislation as we work with the President to transform such 
a critical investment incentive into law. Finally, I would like to 
thank Senators Lincoln, Hutchison, and Kerry for joining me as 
cosponsors to this legislation.
  I ask unanimous consent that the text of the bill be printed in the 
Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                S. 3806

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. RECOVERY PERIOD FOR DEPRECIATION OF CERTAIN 
                   IMPROVEMENTS TO RETAIL SPACE.

       (a) 15-Year Recovery Period.--Subparagraph (E) of section 
     168(e)(3) of the Internal Revenue Code of 1986 (relating to 
     15-year property) is amended by striking ``and'' at the end 
     of clause (vii), by striking the period at the end of clause 
     (viii) and inserting ``, and'', and by adding at the end the 
     following new clause:
       ``(ix) any qualified retail improvement property.''.
       (b) Qualified Retail Improvement Property.--Subsection (e) 
     of section 168 of such Code is amended by adding at the end 
     the following new paragraph:
       ``(8) Qualified retail improvement property.--
       ``(A) In general.--The term `qualified retail improvement 
     property' means any improvement to an interior portion of a 
     building which is nonresidential real property if--
       ``(i) such portion is open to the general public and is 
     used in the trade or business of selling tangible personal 
     property or services to the general public; and
       ``(ii) such improvement is placed in service more than 3 
     years after the date the building was first placed in 
     service.
       ``(B) Certain improvements not included.--Such term shall 
     not include any improvement for which the expenditure is 
     attributable to--
       ``(i) the enlargement of the building,
       ``(ii) any elevator or escalator, or
       ``(iii) the internal structural framework of the 
     building.''.
       (c) Requirement to Use Straight Line Method.--Paragraph (3) 
     of section 168(b) of such Code is amended by adding at the 
     end the following new subparagraph:
       ``(I) Qualified retail improvement property described in 
     subsection (e)(8).''.
       (d) Alternative System.--The table contained in section 
     168(g)(3)(B) of such Code is amended by inserting after the 
     item relating to subparagraph (E)(viii) the following new 
     item:

``(E)(ix).........................................................39''.

       (e) Effective Date.--The amendments made by this section 
     shall apply to qualified retail improvement property placed 
     in service after the date of the enactment of this Act.
  Mr. KERRY. Mr. President, along Main Street, in a countless number of 
towns, many small businesses are placed at a competitive disadvantage 
by our tax laws. Business owners need to remodel their store every 5 to 
7 years. Consumers' tastes and needs change, and to stay competitive, a 
store needs to reflect those changes. If a store is owned, the owner is 
required to depreciate the renovation costs over 39 years, but a store 
that has leased space in the strip-mall across town, depreciates 
renovation costs over a 15-year period. The result: a Main Street store 
owner pays twice as much to renovate as their counterpart who leases.
  Today, I am introducing legislation along with Senator Snowe that 
will even the playing field for businesses that own the real estate 
where their business is located. We want parity between the business 
owners who own and those who lease their property.
  The Treasury Department, the Congressional Research Service, and 
private economists have found that the depreciation life for 
renovations is far too long. These tax rules generate high tax costs, 
laying the burden on small town, rural retailers who are more likely to 
own their property than retailers in urban areas. It is time to address 
this inequity by reducing the 39-year tax depreciation period to 15 
years. I urge my colleagues to support our Main Street stores through 
support of this legislation.
                                 ______