U.S. Representative Rudy Yakym has introduced legislation that aims to rectify a costly error in the Tax Cuts and Jobs Act of 2017, which is costing RV dealers millions each year.
The issue at hand involves the deductibility of interest charges that RV dealers pay to maintain an inventory on their lots. The legislation, known as the Travel Trailer and Camper Tax Parity Act, was one of the RV industry priorities that RV Industry Association (RVIA) members advocated for on Capitol Hill.
The Tax Cuts and Jobs Act of 2017 allowed dealers to only deduct interest on the floor plans they maintain for motorized vehicles, including cars, trucks, boats, jet skis, motorcycles, and even motorhomes.
However, RV trailers, which now comprise about 88% of total sales, were inadvertently omitted from the legislation. This omission means that dealers have been unable to deduct the expense over the past several years, as per the News & Insights report of the RVIA.
According to the most recent estimate, the nation’s RV dealerships were paying about $4.5 million a year in unfair taxes on the towable trailers in their floor plans because of the error.
The issue did not have a significant impact over the past several years due to the demand surge caused by the pandemic when many other activities were eliminated or restricted. Additionally, interest rates were at historic lows for consumers as well as dealers.
However, RV sales have been dropping since last summer, largely because of higher interest rates and waning consumer confidence.
According to the RVIA, RV shipments dropped 52.1% to 109,816 through the first four months of the year compared to the same period last year. This change in circumstances has brought the issue to the forefront, making it a significant concern for RV dealers.
The proposed legislation aims to fix this issue by grouping all RVs, including towables, in the definition of “motor vehicles,” thereby allowing all RVs to be fully deductible. This change would save dealers at least several thousand dollars a year at a time when sales are slumping because of the economy.
The impact of this issue on the RV industry is significant. The inability to deduct interest charges for towable trailers increases costs for dealers, which could potentially be passed on to consumers. This situation could also affect the competitiveness of the RV industry, as dealers may be less willing to maintain large inventories due to the increased costs.
The introduction of the Travel Trailer and Camper Tax Parity Act is a positive step towards addressing this issue. If passed, the legislation would not only rectify the error in the Tax Cuts and Jobs Act of 2017 but would also provide much-needed relief to RV dealers.
The issue of interest deductibility for RV dealers is a significant concern that has financial implications for the industry. The introduction of the Travel Trailer and Camper Tax Parity Act represents a crucial step towards resolving this issue and ensuring the continued growth and competitiveness of the RV industry.
