Recent trip to Central Texas, and noticed that C-stores are popping up all over the place. We've always had a bunch here in the Panhandle, but seems like there are fewer downstate, until now. Discussing it with our son and DIL, they guessed that it's a tax break. They've been scouting investments, and already knew that car washes and storage facilities have accelerated depreciation, which is why they're all over the darn place.

From some basic Googling, it appears that normal business buildings use a 39 year depreciation. But C-stores at one time, could be 100% depreciated in one year, or no more than 15 years. Some of the info was dated, but it appears that, for a while at least, you could depreciate 150% of the cost of a C-store??????

I've used expensing and accelerated depreciation myself on the farm in years past, so I get the concept. What I don't get is why the breaks for C-stores. Is there a nationwide shortage of gas stations? Underserved communities can't find hot dogs on rollers? Slurpee food deserts?

Why the preference for car washes, storage barns, and C-stores? Shouldn't the market decide whether we have more of those, or maybe we need a day care center, restaurant, clothing store, or gun shop.

My suspicion is that CEFCO, 7-11 or Buccees simply greased the needed palms.

Can anyone explain to me why else the preference?

Also, C-Stores should not be allowed to take Food Stamps, its used to buy candy and sodas.

downstate? Are you Canadian?


I didn't realize there was some tax exceptions being made for convenience stores.

But got damn, they are building them everywhere here in Georgetown. I mean everywhere. I think it all follows new road construction, chicken and egg type of thing.

I also think all of our new residents from Central America use them as the primary source of food consumption.

It's about 100 miles from here to Canadian.

https://www.canadiantx.com/

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We've always had a bunch here in the Panhandle,

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Yeah, but those Allsup's were always a dice roll when your bowels were in a bad way.

It's also big oil and gas. 15-20 years ago, big oil and gas sold all their markets and concentrated on selling millions of gallons to dealers and wholesalers. Now the market has changed and they are getting back into it. The old, small, kiosk style gas stations with small stores don't make the return they used to and margins on gasoline are thin. But you add a big, beautiful C-store you can turn a nice profit. Buc'ees is an extreme example of this, but you don't need a mega C-store to do it.

CDUB98 said:

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We've always had a bunch here in the Panhandle,

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Yeah, but those Allsup's were always a dice roll when your bowels were in a bad way.

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Or, the burrito would be what got them in the bad way in the first place.

We needed to help out all the liberal voters that we imported to manage them.

Ornithopter said:

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CDUB98 said:

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We've always had a bunch here in the Panhandle,

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Yeah, but those Allsup's were always a dice roll when your bowels were in a bad way.

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Or, the burrito would be what got them in the bad way in the first place.

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Depositing one Allsup's burrito in the next Allsup's bathroom is a Dallas to Denver road trip tradition.

I believe there used to be (still are?) other financial incentives, having to do with foreigners; It could just be the accelerated tax depreciation.

The stores run by Asian (Indian/ Pakistan primarily) immigrants would frequently change ownership. Take advantage of the financial incentives, then the business gets "sold" to a brother or cousin. It stays in the family but starts the financial incentives over.

I seem to recall one of the family I was speaking with, saying there was some incentive they got for being (legal) immigrants.

I have been in the convenience business for 30 years and have been involved in the opening of hundreds of stores for 6 different publicly traded companies . I have never seen a tax break given for construction of a single one. I believe Buc-Ees gets tax breaks on land in some communities but they are a completely different business model than a typical C-store.

Ornithopter said:

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CDUB98 said:

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We've always had a bunch here in the Panhandle,

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Yeah, but those Allsup's were always a dice roll when your bowels were in a bad way.

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Or, the burrito would be what got them in the bad way in the first place.

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How dare you slander Allsup's burrito greatness!

The C-store has to meet certain requirements to essentially be considered a gas station. I'd be willing to bet the reasoning is, or was originally, to encourage or incentivize the building of gas stations as a means of expanding highway infrastructure. Investors or owners could depreciate the building quickly as a means of offsetting and capturing revenue earlier for a faster payback period.


ETA If that's the case, it's probably never changed much because the market would inevitably take care of the issue. Once it is saturated with enough gas stations, no one will want to invest in more because there is too much competition for the advantageous depreciation to be worth it. Accelerated depreciation, to me at least, is only really effective if your business is actually making money. Otherwise, the write down against revenues is just lowering the loss. At least that's my 10 years removed from accounting understanding.

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I have never seen a tax break given for construction of a single one.

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Seems you weren't paying attention


https://www.kbkg.com/tax-insight/bonus-depreciation-for-gas-stations-with-convenience-stores

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Acquiring or constructing a gas station with a convenience store ("C-store") can be a lucrative addition to a real estate portfolio. Current rules allow investors to immediately write off all the improvements if certain requirements are met, and the property is placed in service after September 27, 2017. This went into effect after the Tax Cuts and Jobs Act when bonus depreciation was raised to 100% through the end of 2022.

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That says "improvements." That does not mean the structure itself. Would need more details that that.

Restaurants also have been able to often use accelerated depreciation on leasehold improvements. That is not for the structure itself though.,

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https://tradenetlease.com/insights/gas-stations-provide-bonus-depreciation-opportunity-in-2023/

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Bonus depreciation is a popular tax incentive designed to encourage businesses to invest in equipment and property. In this article, we'll explain why gas stations provide an ideal investment opportunity for taking advantage of this incentive.

The Tax Cut and Jobs Act passed in 2017 allowed up to 100 percent bonus depreciation until 2022. Each year after 2022, the rate phases out by 20 percent until 2027. This means the rate dropped to a maximum of 80 percent when we hit 2023.

The depreciation schedule for most business assets is around seven years. Meaning that businesses can only claim a limited amount of depreciation in any year. However, bonus depreciation allows businesses to claim a larger amount of depreciation in the first year that an asset is placed in service.

For example, let's say you purchase a gas station for $1 million. In 2023, the maximum bonus depreciation you could claim is 80% of the entire purchase price. This means that, in our example, you could deduct $800,000 from your taxable income in the year that you purchased the gas station.

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So...instead of trying to nitpick and tell me I don't know what I'm talking about, when 30 seconds on Google will show that I do, can anyone indulge in a little reading comprehension and answer the question I actually asked in the OP?

Why gas stations and C Stores?

Does anyone know why the accelerated depreciation on just a few types of businesses? Why is the government picking winners and losers? If it's good for C-stores and car washes, why not simply open the break up for any business?

This smells of lobbying and manipulation of the tax code. Would love to know which congress critters' pockets got lined.

That article is still playing games and is not telling the whole story. Bonus depreciation does not qualify on the structure itself. The structure itself has a different depreciable life than any improvements. Bonus depreciation only qualifies for assess with life's less than 20 years (I believe).

Now at one point gas stations that sold a certain amount in fuel qualified as 15 year assists. that might get you under that limit. I would need to look further into that if it is still the rule or not,


But the % of revenue from gas sales vs other items would have to be really high . Originally I think this tax break was for those stations that were almost all gas. With Very little convenience store. Thank of the gas station with just the little booth in the middle like at wal-mart and many grocery stores.

Since most of their assets were machinery and not building the idea was that they should be treated closer to the 7 year life of machinery and less that the 39 year life of a building,

But Buckees, for example, makes a big chunk of their revenue off food & other stuff. Not gas. I would be surprised if they qualified under this loophole. But it has been a while since I looked into what that % of sales would is set at.

CanyonAg77 said:

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I have never seen a tax break given for construction of a single one.

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Seems you weren't paying attention


https://www.kbkg.com/tax-insight/bonus-depreciation-for-gas-stations-with-convenience-stores

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Acquiring or constructing a gas station with a convenience store ("C-store") can be a lucrative addition to a real estate portfolio. Current rules allow investors to immediately write off all the improvements if certain requirements are met, and the property is placed in service after September 27, 2017. This went into effect after the Tax Cuts and Jobs Act when bonus depreciation was raised to 100% through the end of 2022.

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I am talking about the long term property tax breaks which is what I assume the OP was talking about. When building NTI stores the financing arrangements have changed considerably with a large number of stores built using the MLP arrangement. A company buys or creates another company that is essentially a real estate company and both have separate listing on the SE. The operations company buys a site and builds a store then sells it to the MLP company and leases it back from them which offers a reduction in taxes since MLPs can avoid paying corporate income taxes.

Now that I think about it, I believe there are also entity issues around this setup. A lot of owners set up 2 entities. One for the building & land (usually some sort of partnership). and another entity for the convenience store and everything else (pumps, equipment, etc…)

And then work to keep most of the asset value with the convenience store entity. That is another way to maximize accelerated depreciation.

Yes see my edited post above.

When I worked for CST we had CAP as an MLP and Sunuco had ETP.

Right. I was involved in accounting for a few of these back in the day. But it was small ownership groups. Setup with an LLC/partnership that owned the land & buildings and S corps that owned the convenience stores and would pay rent back to the LLC.

Bonus depreciation is available for all businesses, not just convenience stores. OP, your friends looking into other investments are just confusing "equipment heavy business" with a special tax break. The structure is still a 39 year asset, but everything with a special use (even special foundations or footings that hold equipment) are part of the equipment. If a farmer builds a new building to hold a combine and maybe has a place to put stacked bales of hay, the heavier concrete poured after to support those things, along with all the other modifications to the building, get bonus depreciation. Laundromats that needs extra drainage or car washes that are just structures that include a wash station are not buildings.

Source: am a CPA and have done quite a bit of cost segregation work, including successfully defending it to the IRS.

This is likely to manage passive activity issues with smaller taxpayers and maintain the option of a captive REIT (or public REIT spinoff) for larger taxpayers.

BECAUSE THEY'RE IN FOOD DESERTS!

This thread really turned into a haven for tax & accounting nerds quick. My bad. Back to preparing some last minute 1099 forms and w-2's for me.

Secolobo said:

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BECAUSE THEY'RE IN FOOD DESERTS!

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It appears there are tax breaks for stores in food deserts...

For the tax nerds that helped (thanks), I understand the assertion that tax breaks can be higher (or at least, depreciate quicker) for equipment than for buildings and land.

But I thought some of the references I saw online were for the buildings, and they were specifically written for C stores. As I recall, the rules were:

Had to have >50% gross automotive sales, such as gas and oil

or

Had to devote at least 25% of retail space t automotive. I assume that means the area for oil, DEF, washer fluid, parts...

or

Be <1400 sq ft

Even if the breaks were only for equipment, not buildings and land, it still begs the original question: Why do C-stores get a break, and not a restaurant, bookstore, etc.?

It has to do with asset classes, which are different from tax lives. Every business asset fits into a class based on descriptions like that. Some asset classes are descriptive based on what kind of business it is being used in. For example, airplanes used for commercial transport are in a different class than airplanes used to transport your own employees.

CanyonAg77 said:

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So...instead of trying to nitpick and tell me I don't know what I'm talking about, when 30 seconds on Google will show that I do, can anyone indulge in a little reading comprehension and answer the question I actually asked in the OP?

Why gas stations and C Stores?

Does anyone know why the accelerated depreciation on just a few types of businesses? Why is the government picking winners and losers? If it's good for C-stores and car washes, why not simply open the break up for any business?

This smells of lobbying and manipulation of the tax code. Would love to know which congress critters' pockets got lined.

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It's probably lots of reasons including lobbyists, big oil, big real estate development, and of course Beaver Aplin.

In 2023 The National Assoc of Convenience Stores spent over $3M in lobbying expense.

https://www.opensecrets.org/federal-lobbying/clients/summary?cycle=2022&id=D000000240

You probably haven't been to the burbs of the triangle lately or ever. Growth has skyrocketed recently. Not that that is a good reason, but big real estate development would favor.

I found this article after thinking the Inflation Reduction Act might have something to add since EV charging is a big part of the bill. However, it doesn't seem if you ad an EV charger to your gas station you get accelerated deprecation beyond 2027.

https://pro.bloombergtax.com/brief/inflation-reduction-act-corporate-minimum-tax-and-bonus-depreciation/

samurai_science said:

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Also, C-Stores should not be allowed to take Food Stamps, its used to buy candy and sodas.

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Wait until I tell you that you can use food stamps to buy a double bacon cheeseburger combo with a chocolate shake. Because Braums is technically a grocery store and not a restaurant.

150% is a calculation method, it doesn't mean that they are depreciating 150% of their cost.

Captain Pablo said:

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Ornithopter said:

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CDUB98 said:

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We've always had a bunch here in the Panhandle,

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Yeah, but those Allsup's were always a dice roll when your bowels were in a bad way.

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Or, the burrito would be what got them in the bad way in the first place.

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How dare you slander Allsup's burrito greatness!

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We didn't say anything about the taste of them. You'd be remiss, however, if you denied their effects.

Captain Pablo said:

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Ornithopter said:

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CDUB98 said:

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We've always had a bunch here in the Panhandle,

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Yeah, but those Allsup's were always a dice roll when your bowels were in a bad way.

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Or, the burrito would be what got them in the bad way in the first place.

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How dare you slander Allsup's burrito greatness!

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Allsups is fine dining in the canyon lands! Hell, they even have a pairing guide to help make lunch perfect. Allsups goes the extra mile to make that frito pie sing.

WAWA and SHEETZ used to only be in a few locations in northern Virginia and near Frederick maryland. I loved to stop at them on the weekend when heading out to a hike- clean and large and massive with good food and drinks.

now they are popping up around the DC metro area as well.

CanyonAg77 said:

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Secolobo said:

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BECAUSE THEY'RE IN FOOD DESERTS!

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It appears there are tax breaks for stores in food deserts...

For the tax nerds that helped (thanks), I understand the assertion that tax breaks can be higher (or at least, depreciate quicker) for equipment than for buildings and land.

But I thought some of the references I saw online were for the buildings, and they were specifically written for C stores. As I recall, the rules were:

Had to have >50% gross automotive sales, such as gas and oil

or

Had to devote at least 25% of retail space t automotive. I assume that means the area for oil, DEF, washer fluid, parts...

or

Be <1400 sq ft

Even if the breaks were only for equipment, not buildings and land, it still begs the original question: Why do C-stores get a break, and not a restaurant, bookstore, etc.?

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to answer your bolded part - many industries have specific depreciation lives - see table B-2 of Publication 946. Additionally, tax rule changes with the CARES Act fixed the classification of many assets (See next).
https://www.irs.gov/pub/irs-pdf/p946.pdf

Qualified improvement property (QIP).
Generally, this is any improvement to an interior portion of a building that is nonresidential real property if the improvement is placed in service after the date the building was first placed in service. Also, qualified improvement property does not include the cost of any improvement attributable to the following. The enlargement of the building. Any elevator or escalator. The internal structural framework of the building.

In other word almost everything inside a building and inside its walls are eligible for 100% bonus depreciation because QIP is 15 year property - the same as retail motor fuel outlet.