Last month , RV Industry Association’s (RVIA) Director of Government Affairs Mike Ochs testified at the Department of the Treasury and Internal Revenue Service’s hearing on proposed regulations for limitations on deductions for business interest expenses.
RVIA News & Insights reported that at the hearing, Ochs requested that the IRS use its regulatory authority to clarify whether RV trailers are included in the term “motor vehicle” for floorplan financing interest deductions. The Tax Cuts and Jobs Act inadvertently removed travel trailers from the definition of “motor vehicle” for this interest deductibility. Absent clarification, RV dealers doing more than $25 million in annual sales, are now being forced to cap their floorplan interest deduction on trailers at 30% of earnings, while motorhome interest remains fully deductible.
Ochs gave five compelling reasons the IRS should clarify the situation including:
• The term “Motor Vehicle” includes RVs: RV trailers are motor vehicles under federal statutes, state DMV laws and relevant franchise laws. NHTSA regulates RVs, motorized and towed, which are required to comply with Federal Motor Vehicle Safety Standards.
• There is clear Congressional intent to assist recreation vehicles: Both the House and Senate versions of the Tax Cuts and Jobs Act legislation included recreation vehicles in their definitions of “motor vehicle” pertaining to floor plan interest provisions.
• The Conference Committee did not intend to remove the RV trailer industry, but merely to consolidate language: The Conference Committee streamlined the definition of motor vehicle by removing several previously itemized vehicle types and attempted to cover all of them by using only the term “self-propelled vehicles.” The Committee stated that it believed the terms “are encompassed in the phrase ‘any self-propelled vehicle’ designed for transporting persons or property on a public street, highway or road.”
• Unless the IRS clarifies the scope of the term, RV travel trailer dealers are at a competitive disadvantage: Other dealers of recreation products like boats, motorhomes, conversion vans and motorcycles, can fully deduct the interest paid on their inventory floorplans. Limiting RV trailer dealers’ net interest deduction effectively raises the cost of RV trailers compared to these other products, putting this discretionary product at a competitive disadvantage.
• The current regulatory policy creates a regulatory burden on RV dealers: The disparate tax treatment of similar products sold by the same dealer creates confusion and inefficiency. At a time of broad bipartisan consensus to reduce costly, inefficient, redundant and ineffective regulations, RV dealers are being forced to deal with the costs and burdens of applying different accounting rules to their floorplan inventory.
Should the IRS decline to exercise its regulatory authority, the RV Industry Association’s government affairs team is diligently working to have legislation reintroduced in both the House and Senate to fix this error legislatively. For more information, contact Samantha Rocci at [email protected]