Despite the rumors that it might not happen, on Friday afternoon President Obama signed the Tax Extender Bill into law, retroactively expanding the Section 179 deduction limits through Dec. 31, 2014. This reinstates the limit on Section 179 to $500,000 as well as reinstates 50% Bonus Depreciation.
Last Thursday before Obama had signed the bill, we asked dealers what the last 10 days of the year would look like for them if it were signed. Over 100 dealers replied, with the majority of them saying it would have a positive impact on year-end sales. “We have customers that have been holding off for this reason. Business interest has definitely picked up in the last 2 days. We are expecting a mad rush right after Christmas,” says one dealer.
Nearly 43% of dealers who responded to our poll with a percentage are expecting sales to increase 10-15%, and another 35.7% of dealers are expecting sales to increase by 20-40%. Some dealers even say they could see as much as $5 million in additional sales.
However, many dealers are concerned the passage is coming too late in the year for there to be any meaningful impact. “We are anticipating a mild increase in business. Problem will be obtaining equipment to fill orders in such a short time. Accountants will have to be more willing to accept units not on ground by Dec. 31, or there will be a lot of money left on the table,” says another dealer.
This dealer agrees saying, “It is helping, but it puts a dealer in a bad position if he doesn’t have the equipment in stock to have a serial number before the end of the year.”
One dealer told us he anticipates having more business than time will allow. He also said it will be the smaller ticket items that are selling compared to what sold at the end of the previous years.
While dealers were clearly happy for the prospect of an increase in end of the year business, they also didn’t hide their frustration with our government. As one dealer put it, “It’s too late to do much good. We could have had another $2 million if we would have a tax law with a longer shelf life than a jug of milk!”
“There will be a positive impact on our year-end business. Unfortunately, this legislation should have been handled early in the fourth quarter to allow our customers and us to make better year-end decisions,” says another dealer.
Now during a time when most people would like to be at home relaxing with their families to celebrate the holidays, dealers will be racing the clock to ensure farmers can take delivery on equipment by year’s end. “Because of last minute spending, salespeople are likely going to miss out on their family functions during Christmas because our useless government waited until the last minute when they had all year to do this … family should come first,” said one dealer.
Not only did Congress wait until the last minute to pass the bill but since it only covers 2014, now it’s back to the drawing board come Jan. 1. Once again we’ll be playing a waiting game to see if the $500,000 deduction limit will be extended for 2015. Rather than just extending it again, what Congress needs to do is make the higher deduction limit and 50% bonus depreciation permanent, but I’m preaching to the choir.
In the flurry of business that those of you in the U.S. will be experiencing over the next 7 days, may you find some time to enjoy your families and the holidays.