American Recovery and Reinvestment Act Includes Motorhome Purchase Incentive and Net Operating Loss Provision

The American Recovery and Reinvestment Act economic stimulus legislation includes a tax provision that allows a portion of the sales or excise tax paid on the purchase of a new motorhome to be deducted.

The deduction is attributable to taxes applying to the first $49,500 of the purchase price.  Individuals with an adjusted gross income of up to $125,000 and joint filers with an adjusted gross income of up to $250,000 are eligible for the deduction.

Net Operating Loss (NOL) Provision
The bill also includes an extended carry-back period for small businesses' Net Operating Losses (NOL).  The NOL was designed to help cash-strapped companies and may allow some RV dealers a liquidity boost through a cash refund.

The legislation applies to businesses with gross annual receipts $15 million and under. The NOL Carry-back provision means that RV dealers with $15 million and under in gross annual receipts could carry-back losses three, four, or five years to any profitable year in the previous five years, resulting in a tax refund now. Currently, companies can only carry-back to the two previous years. The new treatment will apply only to NOLs for any tax year beginning or ending in 2008. The normal NOL carry-back period of two years will return for 2009.   Business owners should consult their tax advisor for more details.

The NOL Coalition, including RVDA and RVIA, plans to remain active and work on opportunities to expand these provisions in the future.  

RV industry attempts to include a sales tax deduction for towables didn’t make it into the final bill – the House and Senate conferees kept the provision at motorized product only. An automotive-backed provision about writing off car loan interest did not make the final version either. There may be other opportunities to expand deductions in this session. The RV loan interest deduction remains intact.

Please note: RVDA associate member Crowe Horwath reminds dealers that this provision is not a credit of taxes but rather a deduction for sales tax paid. In addition, since the deduction is taken on an individual’s tax return, the motorhome buyer will not benefit from the deduction until the year following the purchase (when the taxpayer files his or her tax return).