Page 20 - Arkansas Trucking Report Volume 22 Issue 6

But Bell said trucking companies
“THE BIG THING YOU HEAR IS THAT WE WANT TO will do exactly that, because they don’t
SIMPLIFY THE TAX CODE, BUT BASED ON WHAT I’M want to pay taxes and because the tax
savings make the business equation
LOOKING AT, THIS IS NOT A SIMPLIFICATION more favorable. During a presentation
OF THE TAX CODE.” in Nashville before 40 or 50 members
of the National Association of Small
—TROY HOGAN, CPA, DIRECTOR OF KATZ SAPPER AND MILLER’S Trucking Companies, he asked attendees
whether business or tax considerations
TRANSPORTATION SERVICES GROUP
would drive their purchases. Almost all
of them said they didn’t want to pay
taxes.
insurance or pay a fine that was created ing 100 percent deductions during the “Let’s say you had $500,000 tax-
by the Affordable Care Act, otherwise first year, rather than 50 percent, during able income, and you could buy four
known as Obamacare. the next five years. If passed, that would new trucks, and you have zero taxable
Supporters say reducing taxes alter trucking companies’ behavior. income, what are you going to do?” he
would spur the economy. The non- “It’s probably going to change up said. “Buy new four trucks or pay taxes
partisan Committee for a Responsible the way that the companies buy their on a half million dollars? So the way
Federal Budget says the two versions equipment on trade-ins in their eco- they’re going to look at it is that the
would each add at least $1.5 trillion to nomic cycle, and they may be buying tax savings are going to supplement the
the national debt. their equipment based off of the taxable purchase of the equipment.”
The ending of the individual man- income,” Bell said. So I don’t know if
date, included at the behest of Arkansas that’s good or bad, but I’m sure taxes C CORPORATION BENEFITS
Sen. Tom Cotton, seems vulnerable. are going to drive the purchase of equip- Another big issue related to the
Before becoming law, the House ment in the next five years because of tax proposals is that they give bigger
and Senate will have to be reconciled. the liberalized rules that are out there.” advantages to C corporations than
The two groups have agreed to the bill Complicating the matter is the they do pass-through entities – sole
in principle, but they continue to nego- fact that the congressional maneuver- proprietorships, partnerships, limited
tiate how to pay for it before sending to ing is occurring at the end of the year, liability companies and S corporations.
President Trump to sign. After failing to when companies are making decisions That difference led Sen. Ron Johnson,
end Obamacare, Republicans are eager that affect their tax liability for this R-Wisconsin, to announce his opposi-
to pass something before next year’s year and next. Trucking companies are tion to the plan.
elections. deciding whether or not they should Bell said almost all of his clients
Regardless of what happens, truck- buy trucks and trailers now, or whether have those kinds of statuses versus a C
ing companies will have to comply. they should wait until 2018 when new corporation. Even though those types
Richard Bell, CPA, president and provisions, if passed, would allow them of companies pay a higher top rate of
CEO of the accounting firm Bell and to deduct more. 39.6 percent, most trucking companies
Company, said his clients have had a Troy Hogan, CPA, director of Katz prefer them because, unlike a C corpo-
good year. They primarily are smaller Sapper and Miller’s Transportation ration, they don’t have to pay a tax on a
and mid-sized companies with 25-50 Services Group, said he advises clients dividend.
trucks, with some having up to 100 to make decisions based on what makes Bell said if the tax package passes
units. He said trucking companies have business sense rather than how it affects as is, many trucking companies might
been on the equivalent of a “bull run,” their taxes. After all, a company that decide to become C corporations. If
helped by favorable tax rules passed buys equipment simply to earn a tax so, it would mirror what happened in
during the Great Recession that enabled break is spending $1,000 to save $300. 1986, the last time major tax reform
them to write off half of the cost of “I mean, you’re running a busi- was passed under President Reagan,
acquired trucks and trailers, and up ness,” he said. “If you need equipment, when changes to the code advantaged
to half a million dollars, in the year of let’s buy it now. And on the flip side, S corporations and led many trucking
purchase. don’t buy equipment just to garner tax companies to switch then.
deductions. You’ve got to be able to “Now, 30 years later, it appears that
TRUCK AND TRAILER support the use of that equipment, and the tax code’s flipping back to favoring
DEDUCTIONS we’ve got a driver shortage right now, so a C corporation, and so there may be a
Both the House and Senate versions we don’t need to be buying trucks for
would change those provisions by allow- tax deductions.” 

20 Issue 6 2017 | ARKANSAS TRUCKING REPORT