The nation's auto dealers should have a happy holiday season thanks to NADA's and my fellow dealers' efforts to ensure that our priorities were accounted for in comprehensive tax reform legislation. On Dec. 2, the Senate passed the Tax Cuts and Jobs Act (H.R. 1), which included an NADA-supported amendment to preserve 100 percent deductibility of floor plan loan interest. Thanks to a concerted effort by dealers all over the country, this critical provision was included in the legislation.
Preserving floor plan deductibility was one NADA's top priorities for tax reform. In the original Senate bill, the interest deductibility was slashed to 30 percent of adjusted taxable income, which would have been crippling to many dealers and created the risk of paying higher taxes even if a dealership does not show a profit. Not since the Great Recession has there been such a do-or-die moment for our business. Thanks to a lot of hard work, the final Senate bill (as well as the final House tax reform bill) recognized that small-business dealers use floor plan loans to finance our high-cost inventory and are different than big corporations. Limits on floor plan deductibility would disproportionately harm many of our small businesses that are critical to Main Street America.
While challenging, this moment also presented an enormous opportunity to educate members of Congress on how our business operates. I'd like to thank my fellow dealers who have worked tirelessly to reach out to key legislators and explain the unreasonable burdens presented in the original Senate bill. The floor plan loan is the economic cornerstone of the franchised dealership.
This critical amendment was more than just another tax issue to us. The way we've done business for decades was at stake. Without it, many of us would not be able to afford the vehicles that sit in our showrooms and lots—the vehicles customers come to buy. Preserving full deductibility of floor plan interest will help preserve auto sales, dealership jobs and tax revenue for our state and local governments.
Related: Dealerships 101: What is Auto “Floor Plan” Lending?
NADA's strong grassroots efforts played a huge role in this victory. Dealers across the country contacted their respective elected officials to voice their concerns. We especially thank Senator Rand Paul (R-Ky.), who sponsored an amendment to preserve full interest deductibility for floor plan loans, for his leadership on this issue. Other Senators who also fought to ensure the Paul amendment was added to the bill include John Kennedy (R-La.), Bill Cassidy (R-La.), Todd Young, (R-Ind.), Jim Risch (R-Idaho), John Thune (R-S.D.) and John Hoeven (R-N.D.). We thank them for all their efforts on our behalf!
As the new year approaches, NADA will continue to work hard to produce positive outcomes for our community of dealers and the millions of customers we serve. 2017 has held many new opportunities and successes for our industry. As NADA chairman I've been privileged to serve and advocate for our more than 16,500 members from coast to coast. Let's continue to tackle our challenges together. And let's look forward to next year, as we always have, with resilience and strength.
Mark Scarpelli is 2017 NADA chairman and a multi-franchise dealer near Chicago.