WSJ - SUV Tax Break For Businesses Is Likely to End

[Klaus]

SUV Tax Break For Businesses Is Likely to End

By NEAL E. BOUDETTE and KAREN LUNDEGAARD
Staff Reporters of THE WALL STREET JOURNAL
October 7, 2004; Page D6

Small-business owners considering buying a big sports-utility vehicle or full-size pickup truck in the next year or so may want to hurry up a bit: Congress, with the backing of the Bush administration, now appears to be ready to close a loophole that gave small businesses big tax breaks on these vehicles.

Those that qualify must have a gross vehicle weight -- which means when they are fully loaded -- of more than 6,000 pounds. This includes pickups popular with farmers and builders, such as the Ford F-150, Dodge Ram and Chevy Silverado. But it can also kick in when doctors, lawyers or other professionals drive off in SUVs such as the VW Touareg, Hummer, BMW X5, Cadillac Escalade or Volvo XC/90. The loophole allows them to write off against their taxes up to $100,000 from purchases of these trucks -- usually the entire price of the vehicle.

The law is set to expire in 2005, and a bid to extend it to 2007 has run into opposition in House-Senate negotiations over a mammoth corporate-tax bill. Bush administration officials, including Treasury Secretary John Snow, are urging Republican lawmakers to scrap the tax break, or limit it so that it applies only to people who have legitimate business uses for these vehicles. The Senate, however, may still balk at passing the underlying bill.

That has people like Carl Babcock thinking about getting out to a dealer soon. An independent home builder in Ann Arbor, Mich., Mr. Babcock now lugs his gear around in a 2002 Ford Explorer SporTrac.

He was unaware of the tax break when he bought it, and later found out the truck is too light to qualify. "I could use a bigger truck, so if they're going to close the loophole, then I'll most certainly make use of it this year," Mr. Babcock said.

For car dealers, abolishing the tax break could make it a bit harder to sell big SUVs and trucks. With gasoline prices up this year, some consumers have steered away from gas-guzzlers.

SUVs have also been knocked by recent studies showing some are somewhat prone to tip over in accidents.

Mark Godek, tax partner at accounting firm Plante & Moran, said his firm makes sure its many car-dealer clients are aware of the tax break, and many use it in their advertising. The firm also reminds small-business owners when they can qualify for the break, particularly at year end.

Greg Anderson, sales manager at a Los Angeles area Cadillac and Hummer dealership, says the tax break does help sell vehicles -- specifically, Hummers and the Cadillac Escalade -- particularly at the end of the year. He doesn't advertise the tax break, but he makes sure his sales staff tells customers about it. Often though, customers walk in asking which vehicles have a gross vehicle weight over 6,000 pounds. This year he'll be able to add the Cadillac SRX to the list.

Cadillac, after complaints from dealers that business customers weren't buying the SRX since it didn't qualify for the tax break, had its engineering department re-evaluate the vehicle's capabilities so that it would qualify for the tax break, says spokesman Jeff Kuhlman.