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Pressure mounts on Congress for permanent solution to estate tax

November 16, 2010
By Ray Scarpelli Sr., Metro Chicago NADA Director
With the year 2010 and the sunset of the federal estate tax approaching, senators recently raised the issue again in a hearing before the Senate Finance Committee, and on the floor in the form of amendments during the fiscal year 2009 budget debate. 
During the hearing on alternatives to the estate tax, experts testified about the merits of an inheritance tax, where taxes are levied on inheritance recipients, as opposed to the current system that taxes the estate. The panelists had differing opinions on methods for replacing the estate tax, but this mattered little, as none of the proposals was endorsed by Finance Committee Chairman Max Baucus (D-Mont.).
On the Senate floor, several estate tax amendments were offered during budget debate. A non-binding Baucus amendment to make permanent many of the 2001 Bush tax cuts—including an estate tax freeze at the 2009 tax rate, with a top rate of 45 percent and a $3.5 million exemption—passed 99-1. Senate actions show there is bipartisan support for a compromise, and an upcoming Finance Committee hearing on the estate tax, tentatively scheduled for early April, shows an eagerness to find a permanent solution to the issue.
The NADA’s Legislative Office continues to work closely with Congress toward a solution before the estate tax reverses back to an unacceptable 55 percent rate. It is imperative that dealers continue to express to lawmakers the effects of the tax on their dealerships and the need for permanent reform. 
In Regulatory News . . .
The 2008 insurance cost information booklet, which all dealers must make available to prospective buyers, now is available. The National Highway Traffic and Safety Administration produces an annual version of the booklet, which includes comparative information regarding differences in vehicle collision loss experience that could affect auto insurance costs. 
Pursuant to 49 CFR 582.4, all auto dealers must make the booklet available to customers. According to the Federal Register, the NHTSA mailed a copy of the 2008 booklet to every dealer who also receives theU.S. Energy Department’s "Gas Mileage Guide." Dealers who have not received a copy should contact the NHTSA’s Office of International Policy, Fuel Economy, and Consumer Programs at 202-366-0846. Dealers also can a copy of the booklet through the NHTSA Web site, The NADA suggests that dealers keep a copy of the guide available and reproduce it for customers upon request.
The IRS recently issued guidance relating to the new fuel-cell motor vehicle tax credit, which is available for qualified vehicles purchased after Dec. 31, 2005, and on or before Dec. 31, 2014. The base credit ranges from $4,000 to $40,000, depending on the weight of the vehicle and when it is placed in service. The notice provides procedures for vehicle manufacturers to certify that a fuel-cell vehicle meets the requirements for a tax credit, and guidance to taxpayers regarding the conditions under which they may rely on the automaker’s certification that a vehicle is qualified for the credit. It also outlines what taxpayers must do to use the credit. The guidance will be published in IRB 2008-12 dated March 24, 2008. 
Mexico has tightened its used-vehicle import restrictions, amending its pre-existing policy of allowing only vehicles between 10 and 15 years old, to effectively prohibit the importation of vehicles older than 10 years. Bottom line: Only MY 1998 (10-year-old) vehicles may be imported into Mexico from the U.S. or Canada. Moreover, those vehicles are subject to the Mexican Standard NOM 041 maximum permissible emissions law and to a 15 percent value-added tax. Note that beginning Jan. 1, 2009, Mexico will no longer restrict used-vehicle imports more than 10 years old. Every two years thereafter, the minimum used-vehicle age 
drops by two years until, by Jan. 1, 2019, restrictions on used-vehicle imports are phased out completely. For more information, see
The Economic Stimulus Act of 2008 increases by 50 percent the allowable first-year depreciation for certain vehicles, and increases the cap on the first-year depreciation by $8,000. On March 4, the IRS issued guidance on these changes, including a set of tables outlining the new depreciation deduction limitations and income inclusion requirements (relative to leased vehicles) for passenger vehicles, trucks and vans placed into service or leased in 2008. 
The IRS has issued a revenue procedure (2008-23) that permits taxpayers who use the Last-In, First-Out (LIFO) accounting method to place: (i) new cars and light-duty trucks in a single LIFO pool, and (ii) used cars and light-duty trucks in a single LIFO pool. The revenue procedure defines a "light duty truck" as any truck with a gross vehicle weight rating (GVWR) of 14,000 lbs. or less. This new alternative accounting method, known as the "Vehicle-Pool Method," removes the challenge of having to determine the proper pool in which to place crossover vehicles.