Truck Dealers Seek Tax Credit For Purchases of New Vehicles

This story appears in the May 3 print edition of Transport Topics.

KISSIMMEE, Fla. — Truck makers and dealers have called for a 10% investment tax credit to smooth out the buying cycle of the cleaner burning but more expensive trucking equipment.

The truck-making industry, they noted, has been through several cycles of boom and bust caused by the phasing-in of government regulations that sharply cut emissions of soot and nitrogen oxides from diesel engines.

Dennis Slagle, chief executive officer of Volvo AB’s North American truck business, and Kyle Treadway, chairman of American Truck Dealers, made similar suggestions for tax credits to support purchases of new equipment.

Truck dealers also were advised at their April 23-26 meeting here to comply with an array of federal regulations on such issues as metals in paint, the capitalization of property for tax purposes and procedures for reducing identity theft.

“I’m proud of this industry and what it’s done to improve air quality,” Slagle said in a speech. “I remember driving through the yellow haze of Baltimore as a child to go to Orioles games with my father.”

Since 1998, emissions of NOx and PM from new U.S. diesel engines have been reduced, each by at least 90%.

“Taking a page from the successful ‘Cash for Clunkers’ program, which we all heard about in the media, our legislative office has been hard at work crafting similar legislation for truck dealers and pulling together a coalition of stakeholders to ride this wave of dealer empowerment,” Treadway said in his opening remarks.

“You’ll hear more details in the weeks ahead as we ask you to help lobby your legislators to support this key legislation,” the Utah-based Kenworth dealer added.

“What we’ve been through leading up to 2010 is a model of how not to introduce change,” Slagle said. Making engines that are cleaner but more costly tends to push customers away from the early runs of the new technology, thereby wreaking havoc for original equipment manufacturers and their employees.

“It became a crapshoot for the OEMs,” Slagle said. “You work like mad until midnight of Dec. 31 and then tell everyone to go home until I don’t know when.”

In an interview afterward, he said he is a “fan” of the investment tax credit idea circulated by ATD lobbyists at the event and endorsed by Treadway.

Slagle said he prefers a credit to bonus depreciation and that a credit would do a better job of erasing the extra costs — about $9,000 per 2010 heavy-duty truck — with engines that reduce nitrogen oxide emissions to 0.2 gram per unit of output.

The discussions of federal issues were part of the ATD’s annual convention and exposition.

On tax accounting, Terri Harris, a technical adviser with the Internal Revenue Service, told dealers that the federal tax authority is stepping up its enforcement of the uniform capitalization rules for car and truck dealerships, commonly known as UniCap.

For a dealer engaged in on-site retail sales, expenses related to inventory can be expensed completely in that year, Harris said. However, dealerships are often engaged in other activities such as wholesale sales and even production, when they make final modifications to a vehicle for a specific customer.

In those cases, Harris said, overhead expenses related to inventory must be capitalized as property to be amortized over more than one year. This requirement means accountants for dealerships will have to allocate spending between current-year expenses and capitalized property.

Harris recommended dealers talk first with their accountants and then file a change of accounting form with the IRS by the end of this year.

Beyond the realm of taxes, lawyers for ATD’s parent organization, the National Automobile Dealers Association, advised dealers on paint, identity theft and other federal issues.

Dealerships must be in full compliance with the Environmental Protection Agency on paint stripping and application by March next year, said Douglas Greenhaus, director of environment, health & safety in NADA’s Legal and Regulatory Affairs Group.

An EPA flier on the subject said the agency is concerned about vehicle paints containing chromium, nickel, cadmium, manganese and lead. For paint stripping, the targeted compound is methylene chloride.

EPA’s website offers a two-page synopsis of obligations, procedures and record-keeping at www.epa.gov/collisionrepair/index.html.