AED’s 2005 VictoriesWritten By: CHRISTIAN KLEIN
Article Date: 01-02-2006
Copyright(C) 2008 Associated Equipment Distributors. All Rights Reserved.
The "bottom line" impact of the Government Affairs Program
My wife Lona and I travel often (though not as often as we should) to visit her family on their cattle farm in Southside, Va. It's only about 3 1/2 hours from Washington, D.C., but it's so rural that there's not a single stoplight in the county. (Actually, there's one. My mother-in-law bought it at a yard sale years ago and has it in her basement.) I love politics, but I also love my trips to the farm. Frankly, it's refreshing to be in a place where $1 billion is still considered a lot of money!
Those trips make me realize that if the people of Charlotte County, which is just 190 miles from the nation's capital, feel far removed from what Congress is doing, the rest of America must also. If they give a thought to Washington at all, most Americans probably wonder whether what happens here really matters to their lives, jobs, and businesses.
AED's accomplishments in Washington during the last year should answer that question for equipment distributors with a resounding "yes."
First there was SAFETEA-LU, a.k.a. the highway bill, which President Bush signed into law this summer after myriad delays and short-term extensions of TEA-21, the prior surface transportation law. SAFETEA-LU authorizes $286 billion for highways and transit through 2009. While we would have liked to see Congress authorize a lot more (and pay for it the fiscally responsible way: by raising the federal gas tax), the new law represents a 30 percent funding increase over TEA-21. In 2006, we'll spend more than $36 billion on roads at the federal level, almost twice what we were spending a decade ago.
If numbers that big seem abstract, let me put it in more concrete terms. AED estimates that 7 cents of every dollar spent by the federal government on highways makes its way into the hands of equipment distributors. That means next year's road program is worth about $2.5 billion to our industry. I'm not sure it gets more concrete than that! Even if you're not in the business of selling equipment to highway contractors, there's no denying the spin-off impact road building has on the utility, industrial, residential, and commercial construction.
Then there was the rental preference issue. The original version of the Senate bill contained language that would have established a rebuttable presumption in federal law that renting equipment for highway projects is always more cost effective than purchasing it. Before buying equipment, states would have had to demonstrate in writing that it was cheaper to buy then rent. If they wanted to rent, however, no justification would be required.
AED quickly saw the rental preference provision for what it was: a dangerous attempt by Congress to pick winners and losers in our industry. Your association led a successful direct and grassroots lobbying campaign to get the language dropped from the final highway bill and the free market for equipment was preserved.
Last, but by no means least, there was the rental depreciation issue. This summer, the Internal Revenue Service (IRS) circulated a draft guidance document effectively stating that equipment in rental fleets was inventory and not depreciable. The document specifically applied to so-called dual use property, i.e., equipment available for both rental and sale, as so much AED members' rental equipment. IRS agents around the country began raising rental equipment depreciation in equipment dealership audits. The prospect of tens of millions of dollars in retroactive tax liability for our industry loomed.
AED immediately swung into action and petitioned the IRS to withdraw its guidance document. As I write this, the IRS has dropped the rental depreciation issue in distributor audits and shows signs of acknowledging the merit of our position.
No matter where you are in America, Washington probably feels pretty far away. Distance-wise, it may be, but as AED's activities over the past year demonstrate, the impact of what happens in the nation's capital is far reaching and our association can affect what government does if our
members step up and get involved.
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