‘Fix’ is in, but it didn’t come easy
by Mary Margaret Stewart, staff writer
To those familiar with the grocery industry, the “retail glitch” means something. As does the Coronavirus Aid, Relief and Economic Security Act, also known as the CARES Act, approved this past spring, which fixed the glitch.
While that may sound straight forward, the behind-the-scenes of the fix – which inadvertently disrupted the depreciation process for store renovations – took years.
The National Grocers Association tackled the issue early on, first by alerting state associations to the drafting error in the Tax Cuts and Jobs Act of 2017.
“NGA basically said, ‘Hello, everybody. We have a problem,” said Brandon Scholz, president and CEO of Wisconsin Grocers Association. “Thus, the word glitch was introduced into the process. Because nobody knew how to explain it, other than, when they were writing the bill, somebody [made an error]. And so, it was politely referred to…as a glitch.”
From there, NGA mobilized to help form and lead a coalition of like-minded trade associations in Washington, D.C.
“We rely on the D.C. folks to help us with the details and help us with the messaging so that we can use that to help direct our members to be part of the process to help make the change,” Scholz said.
And bringing together different groups within the industry proved to be essential for change.
“One of the ways that you get things across the finish line in D.C. is by working collaboratively with other people who are also impacted,” said Greg Ferrara, president and CEO of NGA. “We were able to work with some of our other partners in the retail community and other organizations…and pull a group together to lobby Congress to get this fix done.”
Pulling together a coalition was just the start, though. Education also was key. Elected officials needed to know that – thanks to the glitch – some categories of business investment, including qualified improvement property, were excluded from being 100 percent eligible for bonus depreciation. As a result, retailers making investments to improve their stores faced a more restrictive cost recovery period than under the prior law.
“We participated in nearly 200 meetings with lawmakers on Capitol Hill on this issue…those efforts helped garnish a legislation that had just under 300 co-sponsors in the House of Representatives and 60 in the Senate,” Ferrara said.
“At a time when Congress has a hard time passing a lunch order, the fact that you’re able to get a bipartisan bill with 297 people in the House, and 60 in the Senate, I think is just a testament to the great work done by the coalition in Washington and the importance of this issue to main street businesses.”
It was two years of work on NGA’s part. From 2018 through March 2020, the association met with or communicated with nearly every Congressional office about the importance of fixing the retail glitch. And this extended through March, too, with NGA and its members heavily involved in fixing this alongside COVID relief. In addition, NGA got the word out online, helping to push forward information about the consequences of the glitch.
“NGA built out a website with information and created a video to educate Americans about the harmful impacts of the retail glitch,” said Molly Pfaffenroth, NGA’s director of government relations. “We crafted messages and infographics on social, including a live Twitter chat we held jointly with the Tax Foundation, and we placed ads on online news platforms that were read by Capitol Hill staffers.
“But the most impactful work that was done was that of our members. We worked to notify and engage our members, and through their efforts we were able to launch an effective grassroots campaign,” she said.
Ferrara agreed, saying that tackling a bill on Capitol Hill comes down to grassroots efforts.
“Washington’s a busy place. And anytime you can help personalize an issue for members of Congress and help them understand how small businesses, main street businesses back in their district are being negatively impacted by an issue, you will move the needle forward,” he said.
“That’s exactly what we did. Our members were great. They got engaged. Back in 2019, almost 600 NGA members signed on to a letter in support of getting this fixed done.
“In just the period of time we worked on this issue, we had NGA members sent over 1,000 letters through our grassroots portal to their members of Congress, urging them to fix this issue.”
And grassroots efforts were taken to another level when NGA helped facilitate several store tours with local independent grocers for members of Congress.
“[Grocers] were able to walk the store and point out to the member of Congress, ‘Hey, we want to replace this refrigeration case,’ or ‘We want to put new front end check stands in’ or ‘We have other work that we want to do in the store, but because of a typographical error, we’re effectively being penalized,’” Ferrara said.
“So, I think what really helped push this across the finish line was the collective voice of NGA’s members, helping their elected officials understand the impact to their local economy.”
Pfaffenroth added that “it’s no secret that the supermarket industry is an incredibly competitive one,” stressing the importance of keeping stores updated and fresh through reinvestment. Often, the cost of doing so is high but necessary, she says.
“Any opportunity to fully depreciate improvements made to stores will significantly help business owners to upgrade their stores, expand offerings and support their local economies.”
In the end, the CARES Act allows retailers to write off 100 percent of the cost of remodeling for any money they invest into their physical space for 2020 and ’21.
Scholz said that the role of state associations, such as WGA, in efforts like these is to help mobilize its members across the state to reach out to their Congressional reps and explain to them how the glitch negatively impacted the grocers’ ability to expand or improve their business.
“That’s a job killer, right there,” Scholz said. “When you’re not going to expand or build because of a mistake by the government, that mistake needs to be fixed quick, because otherwise, who’s going to move forward on something like that?”
Ferrara added, “This was truly a main street America issue. It’s an issue that not only impacts grocers, but it impacts local refrigeration companies and electricians and tradesmen and women who are in local communities as a trickle-down effect in the economy.
“Getting this fixed was not just important for independent grocers, but for many, many local main street communities as well,” he said. “And we’re glad we were able to get it done and appreciate the hard work of our members in lending their voice to this issue, too.”
Currently, the fix provides 100 percent depreciation for retailers until Jan. 1, 2023; however, NGA has committed to extending this fix in the new year after the November election.
“Tax will continue to be one of the most important issues NGA works on, and this issue will be one of those issues that we continue to work on,” Ferrara said.
“This is one that can be mind boggling sometimes because it really is a simple fix…people get that it was very simply a typographical error,” he said. “So we got across the finish line at this point, but we need to continue to work on the issue, and we know we’ll have an opportunity to do that when the new Congress comes in, in January.”
To learn more about NGA, click here.