The House and Senate have each passed energy, highway, and corporate tax bills over the past year. But all have languished in the face of disagreements between the two chambers and White House opposition to a highway bill big enough to satisfy Congress.
Now that time has nearly run out, elements of each bill suddenly seem to have a chance of enactment. Each bill has items that are significant for trucking, so keep an eye on all three. Several factors make passage more likely now than seemed possible before Congress left for its August recess.
Two related developments could spur passage of corporate tax relief. First, we have evidence of a slowdown in economic growth. Second, since March, the European Union has imposed steadily rising tariffs on a variety of U.S. manufactured goods. The tariffs are retaliation for U.S. export-income tax rules that have been deemed to be subsidies. In response, Congress is preparing to replace the current rules with a more straightforward corporate tax cut. That relief may wind up helping domestic firms, including trucking businesses, as well as exporters.
Two other corporate incentives bear watching. The House passed an extension of the provision that lets small businesses expense the cost of new equipment. The amount eligible for expensing was raised from $25,000 to $100,000 in last year's tax bill. Unless Congress acts, the smaller limit will apply again after 2005. The Senate has passed relief for companies that had a net operating loss in 2003, allowing them to carry those losses back five years instead of two under some circumstances.
The continuing escalation of oil and gasoline prices might spur Congress to enact an energy bill after years of dead ends. The Senate version includes a tax credit for biodiesel. It would also let refiners expense the cost of equipment needed to produce ultra-low-sulfur diesel. Both steps could make a small difference in the price of diesel fuel in future years.
The stalemate over the highway bill might break if the President feels he needs to accept a larger highway-spending bill to prevent a drop-off in employment in road construction and the industries that supply materials and equipment for it. To get more money into the Highway Trust Fund, Congress is considering a variety of compliance measures for diesel fuel and changes to other truck taxes.
Both chambers passed a provision to require full payment of the heavy vehicle use tax at one time, rather than quarterly payments. There is evidence that some truckers pay only the first installment. The Senate would require an electronic decal beginning October 1, 2005.
Both chambers also would put a definition of “mobile machinery” into the tax code. Equipment that operates mainly off-road would remain exempt from the trust fund taxes. But vehicles that accumulate several thousand highway miles would be considered taxable, a change that would raise some revenue. (The definition would not provide relief to owners of trucks with pintle hooks. In a July 8 ruling, a federal appeals court upheld a lower court and the IRS, which decided utility trucks with pintle hooks are towing trailers and not merely carrying machinery for off-road use.)
As for the smallest truck tax-on tires-the House would base the tax on a tire's load rating rather than the weight of the tire itself. This change is not intended to raise money but to make the tax simpler and, perhaps, fairer.
The bottom line: Although deadlock has characterized most of this Congress, the last few weeks before Election Day could be as lively as a three-ring circus. That's why trucking executives may need to keep three eyes out for tax changes.