HR701-119

What This Bill Does

The REDUCE Food Prices Act uses tax incentives to encourage food retail investment in counties with concentrated retail food markets. A qualified small food retail business must have at least 70 percent of annual average gross receipts from retail food or produce sales, satisfy the small-business gross-receipts test using a $200 million threshold instead of $50 million, and be located in a low-competition county where USDA Economic Research Service measures a retail food Herfindahl-Hirschman Index of at least 1,400. The bill increases the rehabilitation tax credit from 20 percent to 25 percent for qualified rehabilitated buildings placed in service by those businesses. It raises work opportunity tax credit wage limits for those employers from $6,000 to $8,000, $12,000 to $14,000, $14,000 to $16,000, and $24,000 to $26,000. It raises bonus depreciation phase-down percentages for eligible property and fruit- or nut-bearing plants by substituting 70, 50, and 30 percent for lower scheduled percentages. It raises the section 199A qualified business income deduction from 20 percent to 25 percent for qualified small food retail businesses. It also creates a new section 45BB credit equal to 15 percent of qualified investment amounts paid or incurred by a new food retail business during its first three taxable years for property, facilities, or equipment used for retail food sales.

Who Benefits and How

Small food retailers in low-competition counties benefit from larger credits and deductions for renovating buildings, hiring targeted workers, buying equipment, improving facilities, and opening new stores. Residents in food retail markets with limited competition may benefit if the tax incentives attract or expand grocery and produce sellers, increasing access and price competition. Building contractors, refrigeration suppliers, equipment vendors, and food-retail workers benefit from investment and hiring encouraged by the credits. USDA Economic Research Service data users benefit because the bill ties eligibility to a measurable county concentration threshold.

Who Bears the Burden and How

Treasury and IRS staff must issue guidance, update forms, verify the $200 million gross-receipts threshold, apply the 70 percent food-or-produce receipts test, and coordinate use of USDA concentration data. USDA Economic Research Service staff may need to maintain or publish county-level HHI measures that taxpayers can rely on. Federal revenue collections bear the cost of expanded rehabilitation credits, work opportunity credits, bonus depreciation, qualified business income deductions, and the new 15 percent investment credit. Taxpayers claiming the credits must document low-competition county status, qualified food-retail receipts, placed-in-service dates, wages, investment amounts, and new-business timing.

Key Provisions

• Increases the rehabilitation tax credit to 25 percent for qualified small food retail businesses.
• Requires eligible food retailers to meet food-sales, gross-receipts, and low-competition county tests.
• Increases work opportunity tax credit wage limits for qualified small food retail employers.
• Increases bonus depreciation percentages for qualified food retail property and fruit or nut plants.
• Increases the section 199A qualified business income deduction to 25 percent for qualified small food retail businesses.
• Creates a new 15 percent food retail business investment credit under section 45BB.