Automotive News - November 29, 2010 - Intro
NADA Advocacy Leads to Significant UNICAP Tax Ruling for Dealers
It’s not everyday that the IRS rules in your favor, but that’s just what happened to dealers this month with UNICAP. While the acronym is complex—UNICAP stands for “uniform capitalization methods of accounting”—the ruling is not. It simplifies and favorably resolves several contentious and potentially costly income tax issues that had arisen over the past five years. The dramatic turnaround by the IRS is a huge victory for dealers. Back in early 2006, IRS auditors began to say dealers were undercapitalizing their inventory costs and not reporting enough taxable income (even though numerous dealers had received prior IRS approval of their accounting methods). The IRS also had recently signaled that all franchised dealers needed to change to more burdensome UNICAP accounting methods by the end of this year. I encourage all dealers to speak with their accountants about the particulars of the new safe harbor methods. Some dealers, for example, may get a onetime extra deduction and there are special guidelines for purchasing costs. Also, some dealership facilities might not qualify for the new rules. NADA has posted a helpful set of frequently asked questions about the new UNICAP safe-harbor methods at www.nada.org/ regulations. And on Nov. 30, NADA University will host a Webinar devoted to the subject, featuring IRS Motor Vehicle Technical Advisor Terri Harris and NADA tax consultants from Crowe Horwath, LLP. This is a hugely positive outcome. It means most dealers won’t be required to pay extra taxes related to this issue. And it comes at the right time as we all continue to move the industry toward a stronger recovery. Edward C. Tonkin NADA Chairman
Come to the
NADA Convention and Expo!
This is THE Automotive Industry Event of the Year!
The recent IRS ruling on UNICAP is a hugely positive outcome
NADA first got involved in the issue in 2006 and began a persistent advocacy campaign with the IRS and Treasury on numerous fronts, arguing for a simpler and less burdensome UNICAP approach for dealers. Earlier this year, the IRS and Treasury met with a NADA-assembled group of dealers, accountants and attorneys. After careful review, the IRS created new “safe harbor” accounting methods that generally permit dealers to expense (instead of capitalize) certain costs associated with their inventories, such as handling, storage and related overhead costs. The new, simplified methods are generally available to all franchised car and truck dealers.
Dealer Tax Workshop on Convention Schedule!
Find out how a new IRS UNICAP ruling could impact your dealership. Sunday, February 6, 11 a.m., Room 2000 West • Monday, February 7, 8:30 a.m., Room 2018 West
Plus ... • More Friday events, including 2 full afternoon workshop sessions and a NADA welcome reception co-hosted by J.D. Power and Associates • Dynamic speaker line-up, including former Secretary of State Condoleezza Rice and hero pilot Capt. Chesley Sullenberger • New specialty workshops, including Google, J.D. Power and Associates, and our exciting new social media series • Early 3:30 pm closing on Sunday so you can watch the Super Bowl
Register now at www.nadaconventionandexpo.org