The Tax Cuts and Jobs Act (TCJA), enacted in 2017, made changes to the tax code that have delivered significant benefits to the hotel industry—specifically, to the majority of hotels that are small businesses. Important provisions of that law, however, are scheduled to expire. AHLA has been on Capitol Hill fighting to preserve these provisions in order to give small-business owners the certainty they need and prevent a massive tax hike on our members.
Focusing on Small Business: Three Key Provisions
More than half of the nation’s hotels are franchisees that operate as small businesses, many of them women- and minority-owned. Three provisions of the 2017 tax law have helped these businesses prosper and grow, creating new jobs and strengthening their local economies.
The Small Business Deduction, Section 199A, set that deduction at 20 percent until the end of 2025. AHLA is urging Congress to make this provision permanent. Making the Small Business Deduction permanent would give hotel small-business owners long-term tax certainty that would help them invest in new employees, employee benefits, property improvements, and their communities. If this provision expires as scheduled, small businesses will face a tax hike of up to 33 percent.
Bonus depreciation of 100 percent incentivizes hotel owners to make capital improvements that help them remain competitive. Being able to write off investments in improvements such as updated HVAC systems, signage, and other capital improvements has a ripple effect beyond the hospitality sector, as hotel owners buy manufactured products and hire contractors to install them. Without Congressional action, bonus depreciation is scheduled to drop to 40 percent in 2025 and 20 percent in 2026 before disappearing altogether in 2027.
The Like-Kind Exchange rules, which allow hoteliers to defer capital gains taxes when they sell a property if they roll those proceeds into a larger purchase, encourage entrepreneurship and economic growth, and help create new jobs. If a hotel owner wants to reinvest in their business and upgrade from a 20-room hotel to a 50-room property, for example, they can apply the equity from the first property to the second—which will need a larger workforce and create new economic opportunity. While this provision has no expiration date, it has been a target for caps or offsets for other reductions (“pay-fors”).
Other Pro-Growth Tax Measures
AHLA is urging Congress to act on additional provisions that would boost economic growth and prevent unintended consequences.
Current individual and family marginal tax rates are also scheduled to expire. American paychecks won’t go as far—which would harm not only American workers, but small-business owners and American travelers as well.
Preserving the current corporate tax rate would allow American businesses, including hotels, to compete successfully in the global economy. It would also attract foreign investment to the United States, increase capital for investment, and drive job creation.
Reinstating the full EBITDA deduction would lower both taxes and financing costs. Before January 2022, businesses could deduct 30 percent of their earnings before interest, tax, depreciation, and amortization (EBITDA); currently, interest deductions are limited to 30 percent of earnings before interest and tax (EBIT).
Making the current estate tax permanent would help families pass their livelihoods from one generation to the next—an important goal for the many hoteliers who operate family-owned businesses.
Extending Opportunity Zones (OZs) Tax Incentives would help stimulate job creation and economic growth in low-income communities by channeling investment where it is most needed and prioritized by states and local communities. New hotels have opened in OZs across the country and helped revitalize downtowns and other areas.
The Stakes and the Plan
Beyond the jobs hotels create directly, they deliver essential services that boost local economies, foster tourism, and facilitate business and leisure travel.
The 2025 State of the Industry Report, released by AHLA last month, notes rising operational costs and ongoing labor shortages. The expiration or elimination of key tax provisions, on top of those challenges, would threaten the industry’s growth and long-term stability.
Failure to act will raise direct costs on the industry and represent a significant tax hike that would limit long-term growth and industry stability for small-business owners.
AHLA has organized an industry letter to Congressional leadership calling for the changes needed to keep the economy growing, and hoteliers from around the country will come to Washington in May to make their case to lawmakers at AHLA’s annual Hotels on the Hill event. As the TCJA expiration dates approach, AHLA will continue to advocate for tax policies that benefit the industry and the nation.
