DEALER IMMEDIATE ACTION REQUESTED
We strongly support Congress’ efforts to simplify and restore long-term certainty to the nation’s tax laws while creating economic growth. We are very concerned, however, about the proposed plan to limit the business interest deduction to 30% for businesses with revenue over $25,000,000. If adopted, this proposal would be devastating to equipment dealers. Agricultural equipment dealers have an average annual revenue of $59,000,000. This is reflective of the cost of farm equipment, which often costs up to $500,000 per item.
EDA members and their customers borrow heavily to finance equipment acquisition. Consequently, this limitation on business interest deductions would increase real borrowing costs for equipment dealers while reducing investment and risk-taking. It would also make it difficult for new start-ups and smaller companies to compete with large, entrenched players in many economic sectors since debt financing is how small businesses often survive and operate.
Even though the plan introduced by Congress provides 100 percent expensing, the business interest deduction is still vital. Businesses with capital structures that require borrowing to finance new investments won’t see full benefits of 100 percent expensing (100 percent expensing assumes companies have the cash on-hand without borrowing). Furthermore, many small-medium sized businesses rely on credit to fund new investments or meet operating costs, not solely to purchase assets.
WE ARE ASKING EDA MEMBERS TO CALL THEIR CONGRESS MEMBERS TODAY AND RELAY THE FOLLOWING:
- We strongly urge Congress to place a reasonable cap on deduction amounts rather than restricting it based on company revenues. A restriction of $25,000,000 in revenue would have a devastating impact on EDA members.
- For EDA members, a cap of $5,000,000 in interest deductions (indexed for inflation) should be sufficient to protect the interests of most dealerships. Similar capital investment incentives (such as Sec. 179 expensing) in the tax code are structured with a maximum deduction amount as opposed to the size or revenue of the company.
- Alternatively, we believe that the agricultural equipment industry should receive an exemption from the proposed limitation as received by real estate and utility entities.
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