The Internal Revenue Service (IRS) released both final and proposed regulations on the Tax Cuts and Jobs Act’s (TCJA) bonus depreciation provisions. The proposed regulations address the availability of 100% bonus depreciation for dealers who also deduct floor plan financing interest.
Under the TCJA, a dealer’s ability to deduct floor plan financing interest is not subject to the law’s new limitation on interest deductibility. However, the trade-off for this exemption is the general unavailability of the law’s 100 percent bonus depreciation provisions. In written and oral testimony to the IRS, NADA and the accounting firm Crowe argued – with support from accounting firms Boyer Ritter and Moss Adams – that dealers who deduct floor plan financing interest but do not reach the 30 percent cap on interest deductibility should, similar to other taxpayers, qualify for 100 percent bonus depreciation.
Today’s proposed regulation states that a dealer who has total business interest, including floor plan financing interest, that does not exceed the 30 percent of adjusted taxable income limit is still generally allowed to also claim 100 percent bonus depreciation. This calculation is made on an annual basis. Crowe has published a preliminary explanation of the regulation.
As many dealers elected to extend the deadline for their 2018 tax returns due to the uncertainty surrounding this provision and the extended deadline for pass-through entities is imminent (September 15), dealers are encouraged to discuss the proposed guidance with their tax advisors immediately.
The foregoing is not intended to be legal or accounting advice. Consult your tax advisor for more information. Questions can be directed to Paul Dorsey with NADA Regulatory at firstname.lastname@example.org.
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