With a new President and a democratic majority control of the U.S. House of Representatives, the Senate, and the Presidency, more initiatives are likely to get accomplished in the President Biden’s tax plan. Here we look at some potential impacts on auto dealerships considering this new majority.
President Biden’s tax plan on auto dealers
In a fall 2020 NAADA webinar, Rick Lazio, senior vice president of alliantgroup and former U.S. Congressman, and Dean Zerbe, national managing director of alliantgroup shared their predictions, based on their experiences, on Biden’s tax plan will impact auto dealerships and their owners, including which measures have the greatest likelihood of passing under a Democratic Senate majority.
These are only predictions and should not be considered as fact. Any number of potential changes and circumstances could impact future changes to tax law.
Impacts to businesses likely to pass:
- Corporate tax rate increase from 21% to 28%
- Tax on book income and international tax
- Expansion of the new market credit
- Job investment credits
Impacts to businesses that are less likely to pass:
- Financial transaction tax and carried interest
- Elimination of tax preferences for fossil fuels
- Worker classification (may depend on a California referendum to set precedent)
Impacts to individuals that are likely to pass
- Restoration of pre-tax cut income tax rates for the top brackets
- Increase of capital gains tax
- Estate tax changes and the repeal of the stepped-up basis rule which would raise rates and lower exclusions
Impacts to individuals that are less likely to pass:
- Cap of itemized deductions at 28%
- Repeal of SALT limitation – Not likely to get an outright repeal, some limitations possible
- Increase of Social Security tax
Potential Compliance Impact for Auto Dealerships
While President Biden has and will continue to appoint new staffers to senior levels, the term rollovers will dictate when and how. Therefore, auto dealerships should prepare now for these potential changes in compliance, although timing is still uncertain. Each compliance body that oversees the auto dealership industry are likely to see an evolutionary overhaul and a resulting tightening of compliance under the Biden administration. Here’s what you should know:
Consumer Financial Protection Bureau (CFBP) – Under the Obama administration, auto dealerships came under fire for disparate impact credit discrimination from the agency. However, in 2018, the bulletin was disproved because there was not proof of intent to discriminate. Expect to see the CFBP be more active in the Biden administration as one of its architects, Sen. Elizabeth Warren, is likely to be a key player.
Federal Trade Commission (FTC) – The FTC has oversight over auto dealers and auto finance, but since FTC commissioners serve staggered terms, a mix of political parties will remain in place until 2023. However, a more activist FTC should be expected over time as it is likely the Biden administration will appoint left-leaning commissioners.
The Department of Justice (DOJ) – With President Biden’s selection of Merrick Garland for Attorney General, it is likely the DOJ will have a greater focus on auto dealers who commit fraud, misrepresent transaction information, or any other federal law will likely see more investigations, enforcements, and criminal proceedings.
State Attorneys General – Your state attorney general is likely to be the most active consumer protection body you will face. It is likely states, with backing from the CFPB, will pursue more claims against auto dealers. Therefore, ensure you have a sound policy and procedure for handling consumer complaints.
In preparation for these evolutionary changes, your dealership should:
- Train and update your employees and policies
- Ensure your privacy notice is sufficient and clearly states your sharing practices
- Adopt and implement the NADA Fair Credit Compliance Program and NADA Voluntary Protection Products policy and program, if not already done
Much is yet to be determined as changes continue to take place in Washington. If you need assistance or have questions about these potential impacts, Selden Fox can help. Our team has considerable experience in this area and can identify the appropriate solution for your needs. For additional information please call us at 630.954.1400 or click here to contact us.