The Government Affairs Committee of the American Rental Association (ARA) has identified the following specific legislative issues as the focus for advocacy in 2013.
- Section 179 expensing. Rental businesses of all sizes are sensitive to changes in the tax code. All rental businesses require significant capitalization, thus provisions that affect depreciation and expensing rules can have a significant impact on capital formation in the rental industry. On March 13, 2013, House Ways and Means Chairman Dave Camp (R-Mich.) released a discussion draft on tax provisions related to small business. One of the most important issues in the draft is the proposal to make the Section 179 expensing provisions permanent.
The equipment rental industry is capital intensive. Equipment rental businesses of all sizes purchase new equipment each year just to maintain their fleets. In years the economy is strong, equipment rental businesses also will buy equipment to expand their fleets. Chairman Camp’s proposal would allow businesses to expense up to $250,000 annually for firms investing up to $800,000 in qualified equipment. For every dollar above $800,000 invested, the $250,000 expensing deduction is reduced by one dollar. Both levels are indexed for inflation in the Chairman’s proposal. Moreover, Chairman Camp’s proposal is based on a provision of the bipartisan proposal (H.R. 886) sponsored by Reps. Jim Gerlach (R-Pa.) and Ron Kind (D-Wis.).
For the past decade, small business advocates have fought for a series of extensions to the underlying permanent provision that has a $25,000 annual expensing limit that begins phasing out at $200,000 in annual investment. This underlying provision is inadequate for small businesses competing in today’s economy. ARA supports Chairman Camp’s proposal to increase the expensing and phase-out limits of Section 179 to $250,000 and $800,000 respectively, indexing both limits for inflation and making that provision permanent. Such action will remove the uncertainty of the past decade when small businesses could not effectively plan their investments because expensing rules were unclear.
ARA supports comprehensive tax reform and will continue to work with members of Congress on provisions that will help equipment rental businesses lower their taxes and strengthen their businesses. Chairman Camp’s proposal to make Section 179 permanent is such a provision and ARA is requesting the support of ARA members for this provision.
- The Health Insurance Tax (HIT). The HIT is a provision included in the Patient Protection and Affordable Care Act (PPACA) that is likely to raise health insurance premiums for small businesses. Initially levied on health insurers that provide policies for business that are not large enough to self-insure, the tax is likely to be almost entirely passed on to consumers in the fully-insured marketplace, where nearly all small businesses and the self-employed purchase their coverage.
The tax will raise $8 billion starting in 2014, $14.3 billion in 2018 and more in later years. The amount of the HIT that the insurance company is responsible for is roughly equal to the percent of the market subject to the tax that the insurance company covers. The larger the insurance company’s market share, the higher its annual HIT. Insurers and economists have consistently agreed throughout the health care debate that new taxes on insurers inevitably mean new costs for customers. Because the HIT does not apply to health insurance obtained through government programs or the self-insured plans, the group that experiences the most cost shifting is most likely to be the fully-insured market. Beginning in 2014, Douglas Holtz-Eakin, former director of the Congressional Budget Office (CBO), estimates the HIT alone will raise a family’s premiums by $500 a year, a cost which most small businesses cannot afford to absorb in light of already rising premiums.
ARA continues to work for the repeal of the HIT through involvement with the Stop the HIT Coalition and the National Federation of Independent Business (NFIB).