New Safe Harbor for Retail and Restaurant Remodel-Refresh Projects

On November 20, 2015, the IRS released new rules providing a safe harbor to “qualified tax payers” engaged in a qualifying trade or business to deduct 75% of costs associated with a “remodel-refresh project” to “qualified buildings” and to capitalize the remaining 25%. A trade or business is considered qualified if they are engaged in any of the following:

  1. Selling merchandise to customers at retail with certain exclusions
  2. Preparing and selling meals, snacks, or beverages to customers for immediate on-premises and/or off-premises consumption with certain exclusions
  3. Owning or leasing a qualified building to a taxpayer qualifying under 1 or 2 above

To qualify for the safe harbor, a taxpayer must have an Applicable Financial Statement (AFS) and the building has to be depreciated under traditional tax depreciation methods.

These new rules allow certain taxpayers to look back and claim refunds from tax years beginning January 1, 2014 and later.

Please contact us for further details or have questions about the possible opportunities of this new option.