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November 3, 2017 FacebookTwitterFlickrRSSSEND TO A FRIENDPRINT
Inside this issue
House Tax Reform Bill Released
Treating Pass Throughs Fairly is a Top Tax Reform Concern for NADA
Subaru, Volvo and Nissan Execs Slated for NADA / J.D. Power Conference in Los Angeles on Nov. 28
House GOP Tax Bill Would End Electric-Car Tax Credits
America's SUV Thirst Hits Luxury Brands With Hidden Hangover
Study Predicts Slow, Steady Rise of Electric Vehicles to 2030
How CPO Sales Fared in October
Register Today for NADA Academy Seminar on Advanced Parts Management from Dec. 4-8
Top Stories
House Tax Reform Bill Released

NADA has been meeting extensively with the House Ways and Means Committee to advocate for repealing the estate tax, preserving LIFO, and keeping longstanding business tax deductions, such as the advertising deduction. Yesterday, the House Ways and Means Committee released its long-awaited tax reform bill (H.R. 1) along with a section-by-section description. The bill makes sweeping changes to both the business and individual tax code. Below is a summary of the provisions important to dealers:

  • Corporate Rate:  Reduced from 35% to 20%.
  • Expensing:  100% expensing through Jan. 1, 2023.
  • Advertising Deductibility:  No change.
  • LIFO:  No change.
  • Alternative Minimum Tax:  Repealed.
  • Estate Tax:  Raises the exemption for estates worth more than $5.49 million for individuals and $10.98 million for married couples to $11 million and $22 million, respectively.  The tax is repealed after 2023.
  • Standard Deduction:  Raises the standard deduction from $6,350 to $12,000 for individuals and $12,700 to $24,000 for married couples.
  • Individual Tax Rates:  12% up to $90K, 25% up to $260K, 35% up to $1M, 39.6% above $1 million.
  • Pass-Throughs:  The bill would reduce the top pass-through rate to 25%, with important limits. Business owners could choose between:  (1) The “70/30 proposal” where 70% of income is considered wage income -- which would be taxed at the individual tax rate -- and 30% as business income, which would be taxable at the 25% rate; or (2) a formula based on the facts and circumstances of their business to determine a capital percentage of greater than 30 percent.
  • Business Interest Deductibility:  100% deductible for businesses with average gross receipts of $25 million or less.  For other businesses, interest deductibility is disallowed for expenses in excess of 30% of the businesses' adjusted taxable income.
  • Like-Kind Exchange:  LKEs would be limited to real property.
  • State and Local Taxes:  Repeals the State and local tax deduction except for property taxes (up to $10,000).
  • Electric Vehicle Tax Credit:  Repeals the $7,500 electric vehicle tax credit beginning Jan. 1, 2018.

NADA has been in contact with the leadership of the House Ways and Means Committee and will continue to work with the tax-writing committees to address problem areas, such as the sections on interest deductibility and the tax treatment of pass-throughs.  The House Ways and Means Committee is scheduled to begin considering H.R. 1 on Monday, Nov. 6.  House leaders plan to pass H.R. 1 by Thanksgiving.  The Senate Finance Committee version of its tax reform bill is expected to be released next week.

NADA will provide additional information and next steps after we complete our analysis of the 429-page bill.  NADA members with questions can contact NADA's Legislative Affairs office at legislative@nada.org.
Source: NADA

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Treating Pass Throughs Fairly is a Top Tax Reform Concern for NADA

NADA has been working with Congress to ensure tax reform provides relief for small businesses. Unless the new business rate for pass-through entities provides practical relief, some auto dealerships could face a higher tax burden. A definition of “reasonable compensation” is critical to implementing an equitable tax treatment for pass-throughs under the new 25 percent rate. 

NADA is working with the S Corp Coalition, a coalition of small and family-owned businesses to urge a lower tax rate on pass-through income to promote investment and job creation by all businesses. NADA signed an October 27 letter to the leadership of the House Ways and Means and Senate Finance Committees expressing concern that the rules accompanying a lower pass-through rate are structured properly.  As soon as the tax reform legislation was released yesterday, the S Corp Coalition sent the House Ways and Means Committee a statement citing strong concerns about the pass-through provisions.

NADA and the S Corp Coalition supports the new 25-percent pass-through rate, but we have serious reservations that the guardrails that accompany the rate would severely limit its application to only a small fraction of active pass-through businesses. Under the tax reform bill, 70 percent of profits will be subject to wage income, while only 30 percent will be subject to the new, lower pass-through rate.

In the alternative, pass-through entities have the option to elect an alternative return on capital calculation to claim more profits as pass-through income. This calculation, however, is limited to depreciable property and is less than the real investment many owners have in their business, leaving most small business owners unable to use the election.

Treating pass throughs fairly is a top priority for NADA. NADA will continue to work with lawmakers to address these concerns and request a “reasonable compensation” test that accommodates various S corporation business models.
Source: NADA

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AutoConference LA News
Subaru, Volvo and Nissan Execs Slated for NADA / J.D. Power Conference in Los Angeles on Nov. 28

Tom Doll, president and chief operating officer for Subaru of America, Anders Gustafsson, Volvo Cars USA’s new president and CEO and senior vice president for the Americas, and Jeremy Tucker, vice president of marketing communications and media for Nissan North America, are among the industry speakers at AutoConference LA on Tuesday, Nov. 28, 2017.

Doll

Gustafsson

Tucker

AutoConference LA, hosted by NADA and J.D. Power, will be held at the InterContinental Los Angeles Downtown, the tallest U.S. building west of Chicago. The half-day conference precedes media days at the Los Angeles Auto Show.

Other speakers include Mark Scarpelli, NADA chairman, Finbarr O’Neill, CEO and president of J.D. Power, as well as a panel discussion the future of autonomous vehicles and an analysis on auto retailing in the California market.

Now in its sixth year, the event focuses on the auto industry in the western United States with a focus on the marketplace in California and Los Angeles. The conference attracts hundreds of attendees representing automakers, dealers, suppliers, marketers and advertisers.

The conference starts with a noon luncheon and ends with a networking reception on the 73rd floor of the hotel, which offers unparalleled views of the cityscape and skyline of downtown Los Angeles. For the complete agenda or to register, visit www.autoconferencela.com.
Source: NADA

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More Top Stories
House GOP Tax Bill Would End Electric-Car Tax Credits

The push by Tesla Inc., General Motors Co. and other carmakers to boost sales of electric vehicles was dealt a blow by House Republicans who on Thursday proposed eliminating a $7,500 per vehicle tax credit that has helped stoke early demand. If adopted, the repeal would take effect after the 2017 tax year, according to a summary of the bill released Thursday by the House Ways and Means Committee as part of a sweeping overhaul of the U.S. tax code that would eliminate some deductions and cut the corporate tax rate to 20 percent. The Senate is crafting its own version.
Source: Bloomberg

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America's SUV Thirst Hits Luxury Brands With Hidden Hangover

Luxury carmakers benefiting from red-hot demand for lucrative SUVs are dealing with a behind-the-scenes headache because of just how swiftly demand has shifted away from their sedans. The glut of vehicles being returned after their leases expire disproportionately affects premium lines like Daimler AG’s Mercedes-Benz, BMW AG, Toyota Motor Corp.’s Lexus and Volkswagen AG’s Audi, because they rely more on leasing than mainstream brands. Sales for luxury manufacturers’ car models have dropped dramatically the last few years, leaving them in a bind with both too much supply and falling demand.
Source: Bloomberg

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Study Predicts Slow, Steady Rise of Electric Vehicles to 2030

Pure electric vehicles will not begin to gain serious traction in most global markets until after 2025 and will likely account for only 14 percent of total global vehicle production by 2030, according to a study released on Thursday by Boston Consulting Group. By then, the study’s authors said, improved battery technology, lower costs and government mandates will drive greater consumer demand for EVs, which this year will account for less than 1 percent of the nearly 100 million vehicles sold worldwide and only 6 percent by 2025.
Source: Reuters

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How CPO Sales Fared in October

Certified pre-owned vehicle sales were down 3.3 percent in October, but the year-to-date pace is still on par with the record figures from a year ago. According to Autodata Corp., there were 200,240 CPO sales for the month, compared to 207,105 certified sales in October 2016. However, the 2.22 million certified sales through 10 months of the year is up 0.6 percent from the tally from the same period of 2016.
Source: Auto Remarketing

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NADA Academy News
Register Today for NADA Academy Seminar on Advanced Parts Management from Dec. 4-8

The NADA Academy will be hosting a weeklong Advanced Parts Management seminar at Northwood University in Midland, Mich., from Dec. 4-8, 2017. Attendees will learn how to transform their parts department into a profitable operation by improving inventory, as well as discuss important topics like parts turn and fill rates.

Participants will analyze and discuss their dealership’s performance and walk away with the tools to make significant improvements. The key areas covered include: perfecting the mix, profit-centering, understanding customer needs, a deep DMS dive, case study and SWOT analysis, sharing best practices and more.

Space is limited. To register, click here. (NADA member log-in is required for registration.) For more information, call 800.557.6232 or send an email to academyseminars@nada.org.
Source: NADA

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Quotable
"It's not necessarily the overwhelming amount of vehicles, it's the mix of those flood of vehicles. You're throwing all these cars into the marketplace a couple years after it has evaporated and jumped into SUVs."

    -- Scott Keogh, president of Audi of America, commenting on off-lease vehicles returning to the market and the shift in consumer demand from sedans to SUVs, Bloomberg, Nov. 2

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