On Wednesday the House and Senate gave final approval to a tax reform bill which, according to the RV Industry Association, will benefit the RV industry and further the industry’s current period of historic growth. The final version of the bill will:
- cut the top corporate tax rate to 21 percent beginning with the 2018 tax year;
- allow all floor plan financing interest charges on motorhomes to continue to be a deductible expense (floor plan interest on towables will be subject to a 30 percent limitation on interest expenses based on earnings before interest and taxes);
- lower individual tax bills for 95 percent of all filers, leaving more money in taxpayers’ hands; and
- lower the tax rates to 20 percent for qualified business income of certain small businesses that pass on profits to owners and are taxed at individual tax rates.
Of critical interest to the RV industry was the treatment of the mortgage interest deduction. The House bill would have capped the amount of mortgage at $500,000 and only allowed a deduction for purchase of a primary residence, while the Senate bill would have maintained current law of up to $1 million for first and second homes.
RVIA contacted all House and Senate conferees to educate them on specific provisions of the bills of concern to the RV industry. The compromise reached by the conference committee allows deduction of interest on mortgages up to $750,000, for purchases of first and second homes, which can include RVs.
The glitch in the floor plan interest financing deductibility was partly a result of the speed by which the bill was put together. The conferees modified the definition of motor vehicle under the floor plan indebtedness provisions by deleting the current specific references to “an automobile, a truck, a recreational vehicle, and a motorcycle” and substituting the phrase, “any self-propelled vehicle designed for transporting persons or property on a public street, highway, or road,” without realizing that this would have the effect of removing travel trailers from the definition. RVIA will work with the House Ways and Means Committee and the Senate Finance Committee to include a change to the definition in a technical corrections bill which will likely be needed next year as other oversights and unintended consequences become known.
The legislation will be sent to President Trump for his signature, which is expected to happen before Christmas.