Benjamin Franklin famously wrote in 1789: “In this world nothing can be said to be certain, except death and taxes.” I don’t think even Franklin could have envisioned the Tax Cut and Jobs Act of 2017—the most complex and comprehensive tax bill of the past 30 years. With our federal taxes due April 15, all ATD members should be aware that it contains many provisions that affect our businesses.
Business owners—such as commercial truck dealers—navigate some of the most complex tax regulations each year, and the recent tax code changes can make the process even more overwhelming. While the 2017 tax reform bill preserved 100 percent deductibility of floor plan interest, the IRS has yet to determine if dealers who utilize floor plan may also take advantage of 100 percent bonus depreciation—a vital deduction for all truck dealers. ATD is continuing to pursue this issue. At this point, NADA and ATD have submitted comments on both bonus depreciation and floor plan regulations. We are requesting the IRS to issue favorable regulations that will let dealers, who do not deduct more than the 30 percent of adjusted taxable income cap, to utilize bonus depreciation. We are currently waiting for the IRS to issue final regulations, which are expected in May or June.
The new tax code also:
- Maintains 100 percent deductibility of advertising expenses.
- Reduces the burden of the federal estate tax by doubling the exclusion to about $22.4 million per couple.
- Preserves the last-in, first-out (LIFO) method of accounting.
- Reduces the tax rate—from 35 percent to 21 percent—for dealerships that use C-corporations.
- Pass-through dealerships get rate relief through a 20 percent deduction of pass-through income and a lower top rate on personal returns.
In these days leading up to the federal filing, ATD can provide you with some tax information if you have not yet submitted your taxes for the year. To review more comprehensive information, I direct all ATD members to NADA’s Driven guides.
The guides are a complimentary member benefit available on nada.org. They are updated when necessary and are created by the best subject matter experts in the industry, along with information from NADA Data and the Dealership Workforce Study. Driven guides provide information on a wide range of dealership issues, including taxes. Search for A Dealer Guide to the Tax Cuts & Jobs Act of 2017. Take advantage of this excellent resource and review all the tax changes that affect your business.
On Capitol Hill, ATD continues to fight for improving tax laws impacting truck dealers. ATD is steadily moving forward in the battle to repeal the federal excise tax (FET). The FET is the highest percentage tax levied by Congress on any product. The tax continues to deter the purchase of newer, safer and more fuel-efficient trucks. ATD formed a new coalition, Modernize the Truck Fleet (MTF), to fight this tax. I’m happy to say two more members have joined MTF. They are the National Trailer Dealers Association (NTDA) and the National Tank Truck Carriers Association (NTTC). ATD—along with coalition members—will continue to aggressively advocate for the repeal of the FET as part of a comprehensive infrastructure bill.
Nobody likes taxes. But we can make the process less painful when we share our knowledge and resources with each other. I wish all ATD members a successful 2019 tax season!
Teuton is vice president of Kenworth of Louisiana, a full-service dealership with locations in Baton Rouge, Houma, Lafayette, Lake Charles, Monroe, New Orleans and Shreveport; a full-service Hino dealership in Baton Rouge; and Southland Truck Leasing at all locations. ATD, a division of the National Automobile Dealers Association, represents more than 1,800 medium- and heavy-duty truck dealerships.
Disclaimer: This publication is offered for informational purposes and is not intended as accounting or legal advice. It is essential that dealers consult with their tax practitioners, attorneys, and other professional advisors when contemplating or conducting a dealership valuation for purposes of sale, tax reporting, ownership change, and other circumstances.