NADA Advocacy Leads to Revenue Procedure 2010-44

In a major victory for car and truck dealers, NADA has negotiated with the IRS and the result is uniform capitalization (UNICAP) “safe harbor” methods of accounting for franchised car and truck dealers.  This new Revenue procedure resolves several contentious and potentially very costly income tax issues that have arisen during IRS audits of franchised dealers over the past five years. The new safe harbor methods, which are set forth in Revenue Procedure 2010-44, generally allow car and truck dealers to be classified as retailers who are not required to capitalize handling, storage, or production costs incurred at their retail sales facilities.

The IRS’s creation of the new safe harbors represents a dramatic change in the UNICAP approach the IRS announced in September 2009. Initially, it required dealers to change their UNICAP methods of accounting to conform to an adverse 2007 technical advice memorandum (TAM) on the topic. NADA stepped in and the result is a victory for all NADA and FADA members.

FADA applauds the work of NADA’s team, particularly NADA Government Affairs Chairman Dave Westcott and several ATD representatives (Chairman Kyle Treadway, Vice Chairman Dick Witcher, and former Peterbilt Line Representative Jim Henson).

It is very important that dealers and their tax consultants understand the scope of Revenue Procedure 2010-44, along with its automatic change procedures, audit protection provisions, etc. NADA has posted a brief summary of Revenue Procedure 2010-44.