Early Saturday morning, the Senate passed the "Tax Cuts and Jobs Act," (H.R. 1) which included a NADA-supported amendment to preserve 100 percent deductibility of interest on floor plan loans (a specialized loan that funds vehicle inventory). This amendment, offered by Sen. Rand Paul (R-Ky.), was the top priority for NADA in the Senate tax reform bill.
The Senate Finance Committee bill reported out of committee would have reduced the current 100 percent deduction of floor plan interest to 30 percent of adjusted taxable income, and treated dealerships, generally closely-held small businesses, the same as large corporations.
The Senate tax bill recognizes that floor plan loans used to finance high-cost inventory such as vehicles, boats, farm equipment, etc., are different. The Committee version had inadvertently put small business dealers with high-cost inventory at risk of paying higher taxes, even when the dealership does not show a profit. If the business interest limitation policy had been in place during the Great Recession, it is likely many more small business dealers would have gone out of business.
Senator Paul's leadership on this issue was critical to ensuring that 100 percent floor plan deductibility was included in the tax bill. Other Senators, who also fought hard to ensure the Paul amendment was added to the bill, include Sens. 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.). Please take a moment to thank these Senators, and others you contacted, to make sure they know we greatly appreciate their efforts.
NADA is pleased the Senate bill was corrected to allow full deductibility of interest on specialized floor plan loans. Preserving the full deductibility of floor plan interest will help preserve auto sales, jobs and tax revenue for state and local governments.
With the Senate rushing to pass a major tax overhaul, ensuring that floor plan financing remained fully deductible was a major challenge. However, dealers across America once again rose to the occasion and generated a strong and sustained grassroots involvement needed to prevail on this important issue.
Both the House and Senate tax reform bills include nearly identical floor plan interest deductibility provisions. These bills will soon be considered by a House-Senate conference committee to reconcile their differences before both houses of Congress vote on final passage.
NADA will keep dealers advised of any developments. NADA thanks its members for helping ensure the Paul amendment was included in H.R. 1. If you have any questions, please contact the NADA Legislative staff at 202.547.5500.