Democrats in Washington continue to disagree on whether the bipartisan infrastructure bill or the Democratic-only reconciliation bills should be passed separately or together. Regardless of how this is resolved, the extended negotiations on the reconciliation bill provide an opportunity for NADA to educate members of Congress about the problems with certain provisions, including the threat of major tax increases.
As the bill is scaled-back bill, in an effort to achieve consensus among Democrats, the level of taxes and spending will be reduced as well. This is good news, but NADA is continually meeting with key members and staff on the Hill to get a better sense of specific tax increases remain in play, so the organization can respond appropriately.
NADA has several legislative priorities in the next few weeks:
1) NADA is working to pass the simplest and broadest application of EV tax credits and make sure that EV tax incentives allow dealers to provide “cash on the hood.” Prompt reimbursement for dealers is also key. The sponsors of the EV tax credit continue to insist on a union differential bonus. However, the final structure of the proposal is still undetermined.
2) The House reconciliation bill approved by the House Ways and Means Committee includes several tax increases impacting dealers and is especially punitive to pass-through businesses. The Sec. 199A limited deduction for pass-through businesses (maximum deduction of $400,000/single filers and $500,000/ joint filers) disadvantages the tax treatment of pass-throughs compared to C corps. As proposed, a pass-through would go from a 29.6% rate to 43.4% after taking away the 199A deduction and adding a higher top individual rate (2.6% increase) and expanded application of 3.8% NIIT/SECA tax to essentially all pass-through income. NADA is part of a broad coalition opposing attempts to limit the 199A provisions.
3) Many dealers who use the LIFO accounting method may face significant, unexpected tax liability due to historically low inventories which triggers LIFO recapture. NADA is asking members of Congress to follow up on NADA’s petition to the Treasury Department to allow dealers to replace their new-vehicle inventories over a three-year period, due to a major global interruption of vehicle production. The Treasury Department has the discretion to grant NADA’s petition but has been reluctant, as the statute has not been utilized before.
Any questions regarding NADA’s legislative efforts should be directed to NADA’s Legislative Affairs office at [email protected] or 202.547.5500.