On Oct. 15, the Associated Equipment Distributors (AED) submitted its priorities to the House Ways & Means Committee’s Republican Tax Teams. This entity is charged with studying key tax provisions from the Tax Cuts and Jobs Act (TCJA) and preparing for next Congress’ expected reform debate.
“With much of the Tax Cuts and Jobs Act expiring, it’s imperative that Congress make pro-growth, capital investment incentivizing provisions a permanent part of the tax code,” said AED’s President & CEO Brian P. McGuire. “In 2017, AED was at the table during the TCJA debate and significantly impacted the final product to benefit equipment dealers. Once again, AED and its members will lead the way to ensure the equipment industry’s priorities are fully considered and lawmakers understand the importance of tax policy that propels economic growth, investment and job creation.”
AED’s tax policy priorities for 2025 were focused on the following five areas: Permanently reinstating 100% bonus depreciation; making permanent the 199A pass-through deduction; protecting the deductibility of business interest; maintaining current estate tax exemption levels and stepped-up basis; and addressing the Highway Trust Fund shortfall that threatens transportation infrastructure investments.
AED Priorities Summarized
A summary of AED comments addressing each of the priority areas, which was sent to the House Ways & Means Committee’s Republican Tax Teams, follow.
In urging Congress to reinstate 100% bonus depreciation and make it a permanent part of the tax code, AED wrote:
The 100% bonus depreciation provision from the Tax Cuts & Jobs Act (TCJA) has been enormously beneficial to the equipment industry, its customers and the overall economy. Unfortunately, beginning in 2023, it phased out by 20% per year until it disappears from the tax code in 2027. If 100% bonus depreciation is not reinstated there will be a detrimental impact on the economy, particularly for capital intensive businesses, such as equipment dealerships. Full expensing allows companies to better manage cashflow and reinvest in their businesses and employees.
AED’s comments reinforced the impact on equipment dealers, noting: Whether it’s an equipment dealer purchasing equipment to stock its rental fleet, a farmer buying a combine or a contractor acquiring an excavator, the entire supply chain experiences the benefits from full expensing. For many equipment dealers and their customers, the impact of inaction will be particularly profound.
In emphasizing that Section 199A is a vital part of the tax code and should be made permanent, AED shared this in its letter to the Committee:
The equipment industry is dominated by closely-held, pass-through entities such as S-corporations, limited liability companies (LLCs) and limited liability partnerships (LLPs). In TCJA, the corporate tax rate was made permanent at 21%, which AED strongly supports and urges Congress to continue. To ensure that the benefits of TCJA were widespread and benefit all the types of business entities that contribute to the U.S. economy, Congress created the Section 199A pass-through deduction, which sunsets at the end of 2025. Failure to maintain the pass-through deduction will impose a massive tax increase on America’s job creators, hurt the economy and result in lost jobs.
AED also emphasized its strong support of making the business interest deduction cap at 30% of EBITDA permanent or scrapping all limitations to its deductibility. In its letter, AED offered that preventing companies from deducting business interest has a significant negative impact on capital intensive industries, such as equipment dealers, noting that credit is the lifeblood of the equipment industry. The organization added that it makes it easier for farmers, contractors and others to buy equipment and for AED members to finance their rental fleets, emphasizing that tractors and machinery are expensive and that equipment dealers, and their customers, borrow heavily to finance equipment acquisition. Eliminating or overly limiting business interest deductions increases real borrowing costs for equipment distributors and other capital-intensive industries, while reducing investment and risk-taking.
In its attempt to urge Congress to maintain the current estate tax exemption levels and stepped-up basis, AED wrote that it believes the estate tax is unfair, discourages saving and investment, leads to economic distortions, and amounts to double taxation.
However, it noted, absent repeal, AED supports making permanent the TCJA provisions, which doubled the exemption to approximately $11 million for tax year 2018 and indexed future increases for inflation through 2025 (currently $13.6 in 2024).
Additionally, noted AED, stepped-up basis should be maintained, as it prevents family-owned businesses and farms from being hit with two significant and damaging tax bills when a family member passes away — the capital gains tax on any appreciated assets, and the estate tax on whatever is left. AED opposes any changes to stepped-up basis that would impose this double death tax and increase taxes on family-owned businesses and farms.
Lastly, AED emphasized that transportation infrastructure is critical to America’s economic growth and competitiveness, and reinforced its stance that Congress must create new Highway Trust Fund (HTF) revenue streams. It stated: without new revenues, the HTF is in true jeopardy. It stated that declining revenues have made transfers from the general fund necessary to prevent road and bridge spending cuts. Many studies have shown that merely maintaining current spending is insufficient to build the infrastructure our country needs. Examples offered included: raising existing motor vehicle fuel user fees; implementing electric and other alternative fuel vehicle user fees; instituting a national registration fee for all vehicles; and/or creating a national vehicle miles traveled fee.