Arkansas Trucking Association

IRS Rule Favorable on Truck Fleets

New tax rules that start January 1 will change the way trucking companies and other U.S. businesses account for real estate and business equipment and could create room for more same-year deductions rather than multiyear depreciation, according to several tax experts.

“If you can deduct it immediately, you’ll recover the expenditure faster. Otherwise, it could take several years to recoup it,” said CPA Christopher Bradburn of Indianapolis accounting firm Katz, Sapper & Miller, which represents about 95 U.S. trucking companies.

Known as Tax Decision 9636, the rule could be particularly important for less-than-truckload carriers, which have large real estate holdings for their networks of terminals.

Highway tractors usually are depreciated on a three-year schedule. Tax analysts believe the rule is almost “too good to be true.” A Katz, Sapper & Miller analysis for its clients said the companies that can be most aggressive in expensing purchases are publicly traded firms that have to file an annual 10-K report with the Securities and Exchange Commission or a privately held firm that pays for a certified, audited annual financial statement and has a written policy in place on deductions and depreciation.

“We haven’t reviewed the regulations well, but we don’t anticipate too great a problem,” said Robert Ragan, chief financial officer of flatbed carrier Melton Truck Lines in Tulsa, Okla. He said his company has long had an audited statement and a written deduction-depreciation policy in place. For smaller carriers, the process is more daunting, said Terry Croslow, CFO of Venture Express in La Vergne, Tenn.

“I’ve been rewriting our policy to take advantage of the de minimis rule and keeping an eye out for items to capitalize, but I think there’s a lot of lost productive time spent to comply,” Croslow said after going through much of the 73-page rule. For carriers with $30 million to $50 million in annual revenue, certified audits are not typical, said Croslow, a former chairman of the National Accounting & Finance Council of American Trucking Associations.

For regular maintenance, though, including the replacement of loading dock doors that get battered through regular use, such items can be expensed immediately, said Joe Parrish of Grant Thornton, LLP, as he has advised his trucking clients. “These rules give companies an opportunity to take a second look at their policies on these issues,” he said. Grant Thornton's Parrish and KSM’s Bradburn agreed that carriers should have written policies on deductions and depreciation in place by the beginning of their tax years. Without a written policy in place a company cannot take advantage of safe harbor rules offered in 9636.

Bradburn also said that bonus depreciation, which has been popular in trucking, probably will expire at the end of this year unless Congress acts to extend it. He said his company has been advising trucking clients to try and put new trucks into service before the end of this year, if possible, rather than waiting until the first quarter of 2014.