U.S. Treasury Dept. Issues Final Regulations on Floor Plan Financing and Bonus Depreciation

Last week, the U.S. Treasury Department issued a second set of final regulations that clarify a couple of write-off provisions that were enacted under the Tax Cuts and Jobs Act of 2017, and are of note to dealers.

According to the National Automobile Dealers Assocaition, the latest set of guidance clarifies that “dealers whose total business interest, including floor plan financing interest, is below the statutory cap on interest are eligible for bonus depreciation.” The cap on interest deductibility had been 30 percent of a dealer’s adjusted taxable income through 2019, but was raised to 50 percent for 2020 under the CARES Act.

Under that law, passed this past spring, the ATI cap for interest deductibility was also retroactively raised to 50 percent for corporations in the 2019 filing year.

Also, according to NADA, the Treasury Department has clarified that “the determination of a dealer’s eligibility for bonus depreciation is made on an annual basis (meaning ineligibility one year does not necessarily preclude eligibility the next year).” In addition, “the IRS will promulgate transition rules for dealers who elected out of bonus depreciation or who reduced their floor plan financing in 2018.”

NADA has said that it will issue additional guidance on the Treasury regulations in the near term, and we will be sure to share that in an upcoming issue of the Bulletin.

Download Bulletin PDF