Overview
Title
To amend the Internal Revenue Code of 1986 to provide tax incentives for the establishment and operation of small food retail businesses in areas with high food retail concentration and low levels of competition.
ELI5 AI
H.R. 9993, the "REDUCE Food Prices Act," is like giving small grocery store owners special money bonuses to help them start and grow their stores in places where there aren't many other stores, helping more people find places to shop for food nearby.
Summary AI
H.R. 9993, also known as the "REDUCE Food Prices Act," aims to amend the Internal Revenue Code to offer tax incentives for small food retail businesses. It provides increased tax credits and deductions for these businesses if they operate in areas with high food retail concentration but low competition. Key aspects include higher rehabilitation tax credits, a new tax credit for businesses started within three years, elevated work opportunity tax credits, and bonus depreciation benefits. The bill intends to encourage the establishment and success of small food retailers to promote competition and potentially reduce food prices.
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AnalysisAI
Summary of the Bill
The proposed "Restoring Establishment Deductions and Uplifting Competition to Ease Food Prices Act" or "REDUCE Food Prices Act" aims to amend the Internal Revenue Code of 1986. It seeks to provide various tax incentives to small food retail businesses that operate in areas with high food retail concentration and low competition. Key provisions include increased rehabilitation tax credits, enhanced work opportunity tax credits, greater bonus depreciation rates, increased business income deductions, and a new tax credit for investments by new small food retail businesses. These incentives are structured to encourage the establishment and operation of small food retailers in competitive markets, thereby enhancing accessibility and affordability of food options in these areas.
Significant Issues
A notable issue with this bill is the ambiguity surrounding what constitutes a "qualified small food retail business." The definition lacks specificity, which could potentially allow larger businesses to benefit from these incentives, contradicting the bill's intent to support smaller entities. Additionally, the substantial increase in the qualification threshold from $50 million to $200 million could further blur the lines between small and larger businesses eligible for these benefits.
The reliance on technical tax code language and references within the bill text may limit comprehensibility for those unfamiliar with tax law, potentially leading to misinterpretation or improper application. Solely using the Herfindahl-Hirschman Index to define low-competition areas might be insufficient without considering other relevant market indicators.
The bill appears to lack oversight and reporting mechanisms to ensure that the tax benefits are used as intended. Furthermore, there is little clarity on how businesses should prepare for or transition to these new incentives, which might impose additional administrative burdens. Absence of credit claim caps might also lead to excessive claims, affecting government revenue significantly.
Public Impact
Broadly, the bill aspires to enhance food accessibility and affordability by incentivizing small retailers to operate in markets with less competition. This intent suggests potential positive outcomes for consumers, particularly in areas traditionally underserved by competitive food retail options. The enhanced market competition could lead to lower prices and improved service quality.
However, if larger businesses exploit the ambiguities in eligibility, the intended small businesses may not reap the proposed benefits, diluting the bill's impact on promoting competition and lowering food prices.
Impact on Specific Stakeholders
For small food retail businesses, this bill presents a mix of opportunities and challenges. On the one hand, the various tax credits and deductions offer financial incentives that could spur business development and innovation. On the other hand, unclear eligibility requirements and significant administrative adjustments may pose challenges, especially for genuinely small businesses without extensive legal or financial resources.
Consumers in low-competition areas stand to gain access to a wider array of food options and potential price reductions. However, if the bill primarily benefits larger enterprises under the guise of small business support, consumer benefits might not be fully realized.
From the government's perspective, while the bill encourages economic activity and competition, the potential lack of limitations and oversight on credit claims could lead to substantial revenue losses without corresponding economic gains.
In conclusion, although the "REDUCE Food Prices Act" is well-intentioned and addresses a critical need for improved food access, careful consideration must be given to refining definitions, enhancing clarity, and implementing robust safeguards to ensure that the intended small businesses and consumers truly benefit from these legislative changes.
Financial Assessment
The bill H.R. 9993, titled the "REDUCE Food Prices Act," proposes modifications to the Internal Revenue Code of 1986, primarily through tax incentives intended for small food retail businesses. Here's a breakdown of the financial elements and an analysis of their implications:
Financial Allocations and References
Increased Rehabilitation Tax Credit
The legislation suggests raising the rehabilitation tax credit from 20% to 25% for small food retail businesses. This increase, detailed in Section 2, applies to qualified rehabilitated buildings. The aim is to provide substantial financial relief to businesses seeking to rehabilitate properties in low-competition areas.Work Opportunity Tax Credit Enhancements
Section 3 enhances the limits on work opportunity tax credits for specific wages. The ceiling for eligible wages is increased as follows:- From $6,000 to $8,000
- From $12,000 to $14,000
- From $14,000 to $16,000
From $24,000 to $26,000
This increase is designed to incentivize employers to hire within these dynamic conditions, potentially stimulating local employment opportunities.Bonus Depreciation Modifications
Section 4 introduces an amendment that allows increased bonus depreciation for these small food retail businesses. The applicable percentages for property placed in service are escalated:- From 60% to 70%
- From 40% to 50%
From 20% to 30%
This offers significant upfront cost savings on purchases of qualifying depreciable property.Business Income Deduction Increase
Section 5 increases the qualified business income deduction from 20% to 25%. This serves as an additional financial boon, reducing the taxable income for these businesses and potentially leaving more capital for reinvestment or expansion.New Food Retail Business Credit
Section 6 introduces a new tax credit for fresh food retail businesses set up within the last three years. The credit amounts to 15% of qualified investment amounts used in the business's retail operations. This intends to encourage new market entries, fostering competition and potentially reducing food prices through increased market diversity.
Issues and Implications
The financial provisions present some challenges and ambiguities:
Threshold Adjustments: The increase in the qualifying revenue threshold from $50 million to $200 million might unintentionally allow larger entities to benefit from these credits, potentially overshadowing genuinely small businesses the bill aims to support.
Definition Clarity: The lack of specificity regarding what constitutes a "qualified small food retail business" could lead to larger businesses exploiting these tax benefits, undermining the legislation’s intent.
Lack of Oversight and Reporting: There are no explicit provisions for oversight or accountability outlined, raising concerns about the potential for misuse of these allocations and deductions without proper checks.
Technical Complexity: Given its reliance on technical terms and cross-referencing of tax code sections, the bill might limit understanding among small business owners, potentially hindering its effective implementation.
Revenue Implications: With no cap on new tax incentives, the potential extent of government revenue reduction remains uncertain, which could be concerning if the economic benefits do not equally compensate for the fiscal losses.
In summary, while H.R. 9993 aims to bolster small food retailers through several significant tax incentives, it could face implementation hurdles owing to its broad definitions and ambitious financial thresholds that risk diluting the intended focus on genuinely small market participants.
Issues
The definition of 'qualified small food retail business' is vague and lacks specificity across multiple sections (Sections 2, 3, 4, 5, and 6). This ambiguity could lead to larger businesses benefiting from incentives meant for smaller entities, undermining the bill's purpose of aiding small businesses.
The increase in threshold for qualification from '$50,000,000' to '$200,000,000' (Section 2) could allow larger businesses to qualify for benefits, which may not align with the bill's intent to support genuinely small businesses.
The use of technical language and references to other sections of the tax code (Sections 2, 3, 4, 5, and 6) may render the bill inaccessible to those without a background in tax law, risking misunderstanding or misapplication of the provisions.
Relying solely on the Herfindahl-Hirschman Index to define 'low-competition area' (Section 2) might be inadequate, as it does not consider other factors that could influence the competitiveness of an area.
No specific oversight or reporting requirements are mentioned to ensure the intended use of increased benefits and deductions (Sections 2, 3, 4, 5, and 6), raising concerns about potential misuse or lack of accountability.
There is a lack of clarity on the rationale for choosing specific increased numerical limits and percentages in the tax credits and deductions (Sections 3 and 4), which could raise questions about the fairness and efficacy of these changes.
The bill does not detail transition strategies or compliance guidelines for businesses to adjust to the new laws (Sections 3 and 5), potentially imposing an administrative burden on them.
The potential for credit claims without caps or limitations (Section 6) could lead to significant revenue loss for the government, which might not be balanced by the intended economic benefits.
Sections
Sections are presented as they are annotated in the original legislative text. Any missing headers, numbers, or non-consecutive order is due to the original text.
1. Short title Read Opens in new tab
Summary AI
The first section of the Act states its official name, which is the "Restoring Establishment Deductions and Uplifting Competition to Ease Food Prices Act" or the "REDUCE Food Prices Act."
2. Increased rehabilitation tax credit for qualified small food retail businesses Read Opens in new tab
Summary AI
The section proposes increasing the rehabilitation tax credit from 20% to 25% for qualified small businesses focused on selling food in areas with limited competition, specifically where less competition is measured by a high Herfindahl-Hirschman Index. The changes apply to eligible properties placed in service after the Act's enactment date.
Money References
- — “(A) IN GENERAL.—For purposes of paragraph (1), the term ‘qualified small food retail business’ means a business— “(i) which is described in section 38(c)(5) (determined by applying ‘$200,000,000’ for ‘$50,000,000’ in such section), “(ii) at least 70 percent of the annual average gross receipts of which are attributable to the retail sale of food or produce, and “(iii) which is located in a low-competition area.
3. Increased work opportunity tax credit for qualified small food retail businesses Read Opens in new tab
Summary AI
The section increases the work opportunity tax credit limits for businesses classified as qualified small food retail businesses. Specifically, it raises various wage thresholds by $2,000 for these businesses, and the changes will apply to tax years starting after the new law is enacted.
Money References
- (a) In general.—Section 51(b)(3) of the Internal Revenue Code of 1986 is amended— (1) by striking “The amount” and inserting “(A) IN GENERAL.—The amount”, and (2) by adding at the end the following new subparagraph: “(B) INCREASED LIMITATION FOR QUALIFIED SMALL FOOD RETAIL BUSINESSES.—In the case of wages paid by an employer that is a qualified small food retail business (as defined in section 47(e)(2)(A)), subparagraph (A) shall be applied— “(i) by substituting ‘$8,000’ for ‘$6,000’, “(ii) by substituting ‘$14,000’ for ‘$12,000’, “(iii) by substituting ‘$16,000’ for ‘$14,000’, and “(iv) by substituting ‘$26,000’ for ‘$24,000’.”. (b) Effective date.—The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act. ---
4. Increased bonus depreciation for qualified small food retail businesses Read Opens in new tab
Summary AI
The section provides that qualified small food retail businesses can receive an increased bonus depreciation, allowing them to write off a larger percentage of the cost of property placed in service or certain plants they plant or graft, compared to the standard rates. These changes apply after the law is enacted.
5. Increased qualified business income deduction for qualified small food retail businesses Read Opens in new tab
Summary AI
The section modifies tax regulations to increase the deduction for qualified small food retail businesses from 20% to 25% of their qualified business income. This change applies to tax years starting after the law takes effect.
6. New food retail business tax credit Read Opens in new tab
Summary AI
The new section of the Internal Revenue Code introduces a tax credit for new small food retail businesses, allowing them to get back 15% of the money they spend on investments in their property, facilities, or equipment. This credit applies to businesses that started operations within the past three years and will become part of the general business credit starting the taxable year after this law is enacted.
45BB. New food retail business credit Read Opens in new tab
Summary AI
The new food retail business credit allows small food retail businesses that started in the last three years to receive a tax credit equal to 15% of their qualifying investment costs, which are expenses for capital improvements in their business premises, like property or equipment used for retail sales.