Pub. 16 2017-2018 Issue 4

N E W J E R S E Y C O A L I T I O N O F A U T O M O T I V E R E T A I L E R S I S S U E N O . 1 , 2 0 1 8 10 new jersey auto retailer NADA Director’s MESSAGE | BY RICHARD A. DESILVA New Jersey Dealers Must Continue Work on Critical Issues Last year, the Republican-led Congress, under President Trump, brought tremendous change to Washington. I am happy to report that NADA—and dealers everywhere—have made significant progress on priority issues for dealers. Our most noteworthy items include enactment of comprehensive tax reform which cut taxes for dealerships; saving dealer-assisted financing fromoverregulation by the Consumer Financial Protection Bureau (CFPB); and, as the latest challenge, preserving state franchise laws that have been under threat in autonomous vehicle legislation. All franchised dealers should be aware of the following issues for 2018. NADA-Supported Tax Reform Bill Enacted into Law In less than two months, President Trump and Congressional Republicans enacted into law H.R. 1, a comprehensive tax reform bill. H.R. 1 is the first major rewrite of the tax code since 1986 and contains numerous provisions of interest to dealers. Below are some of the tax issues NADA fought for on behalf of franchised dealers: • Preserving full deductibility of floorplan interest. The original House and Senate tax bills generally disallowed interest deductibility, including f loorplan financing, for interest expenses in excess of 30 percent of adjusted taxable income. NADA supported the Brady amendment to preserve full deductibility of floorplan interest in the House and the near-identical Paul amendment in the Senate. NADA's posi- tion prevailed, and floorplan interest remained 100 percent deductible in the final bill. (H.R. 1 provides that entities that use floorplan financing indebtedness cannot claim the new temporary immediate expensing provisions; however, Section 179 expensing, with permanent increased limits, remains available.) • Lowering the tax rate and ensuring tax relief for pass- through dealerships. The final bill allows a 20 percent deduc- tion on pass-through income (including from trusts and estates), which results in an effective tax rate below 30 percent for business income. The 20 percent deduction for pass-through income is limited to 50 percent of the W-2 wages paid by the business or the sum of 25 percent of the W-2 wages plus 2.5 percent of depreciable capital. • Maintaining the LIFO (last in, first out) inventory account- ing method. NADA fought to preserve LIFO, which many