How 'fiscal cliff' deal impacts small restaurateurs, franchisees | Latest ...

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While the restaurant industry breathed a collective sigh of relief when the White House and Congress just narrowly avoided plunging the country over the "fiscal cliff" in December, not everyone is thrilled with all aspects of the deal.

?We?re pleased to see a deal reached on the fiscal cliff,? said Rob Green, president of the National Council of Chain Restaurants. ?But we?re not out of the woods yet.?

While the Taxpayer Relief Act of 2012 ensured that about 98 percent of Americans and 97 percent of small businesses would not see their income taxes rise in 2013, some restaurateurs will not be so fortunate.

Small business operators who make more than $450,000 annually and file federal tax returns for their businesses as pass-through entities will see their tax rate rise by almost 5 percent to 39.6 percent, according to Jay B. Perron, vice president of government relations and public policy for the International Franchise Association.

Filing as a pass-through entity means that owners are taxed individually on the income from their business rather than on the business itself, thereby avoiding double taxation. Partnerships, sole proprietorships, LLCs ? or limited liability corporations ? and S corporations are categorized as pass-through entities for federal income tax purposes.

As a result, many who will see a rise in their federal income tax rate would like to see Washington address the issue of comprehensive tax reform. That would bring some relief to small restaurant operators and franchisees, which often file as pass-through entities, according to Perron.

Steve Caldeira, president and chief executive of the IFA, said the Washington-based associationwould continue to push for comprehensive tax reform for both corporate and individual rates in 2013.

?The U.S. has the highest corporate tax rate in the world,? he said. ?We need to be more competitive in the global economy, but it can't come on the backs of the small business community. Small business creates nearly two-thirds of the net new jobs in the U.S., and that's why we need to be focused on extending income tax rates for all levels. Why should we raise taxes on anyone in this fragile recovery??

Scott DeFife, executive vice president, policy and government affairs for the National Restaurant Association, said the NRA also would be lobbying for tax reform this year.

?It was apparent that comprehensive tax reform was not going to come to pass while policymakers tried to find consensus on the fiscal cliff, and the agreement did result in increased tax rates on some individuals as well as the expiration of the payroll tax holiday,? he said. ?Comprehensive tax reform remains a top agenda item for 2013, and the National Restaurant Association will continue to advocate for operators? desire to have a simpler tax code and lower rates.?

Source: http://nrn.com/latest-headlines/how-fiscal-cliff-deal-impacts-small-restaurateurs-franchisees

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