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November 2017
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Recovery status

I had the pleasure of attending the Associated Equipment Distributors Executive Forum a few weeks ago. The first speaker on the agenda was Ed Sullivan, the senior economist for the Portland Cement Association. The last speaker on day two was David Raso, a machinery research analyst with International Strategy and Investments. The interesting thing is, however, that while both speakers came at their conclusions from slightly different viewpoints, they basically both reached the same conclusions: That 2013 is going to be nothing to write home about.

“JOBS” is the main issue holding us back, and until people are working again (all people that want a job) consumer confidence will remain low and keep the economy basically flat. A substantial improvement is possible in 2014-15 IF Congress deals with the fiscal cliff before the end of 2012. If Congress kicks the can down the road again both speakers suggested the recovery would be delayed until 2015-16.

Typical equipment buyers are turning to rental as opposed to buying. On the construction side contractors are shying away from rent-to-buy deals. In fact, a couple of major dealers were very concerned that many of their outstanding RPO’s are coming back and will wind up on their balance sheets. Inventory levels for new equipment are increasing on both OEM and dealer balance sheets. Used equipment values are flattening out.

On the material handling side, as on the construction and rental company side, there are currently some good markets, flat markets and some bad markets. The Midwest seems to win the prize for the slow market. So for some of you it is business as usual while some are seeing continued reluctance to take on purchase type rental agreements when an option is available to return the units when the lease terminates. Operating leases seem to be ruling the day.

It was interesting that both speakers mentioned cleaning up the Fiscal Cliff before the end of the year. I guess the thinking is if we don’t it will take six to eight months to get the issue resolved, which then pushes us into 2014. If I had to guess “kicking the can down the road” will be the outcome, thus pushing out the recovery another 12 months. (You know what, we need term limits.)

Speaking of fiscal cliffs, how are you doing with yours? It is the tax cliff I am referring to and I want to remind you again to review and project your 2012 tax liability. And, after you finish your budget for 2013, I would do the same making sure you account for all the used equipment with zero tax basis you sell. You know the story….if you used Bonus Depreciation as it was available you potentially deferred a lot of tax which could come home to roost when you sell the units. If your analysis shows you have this potential liability I would contact Ron Hodgeman at WTP Exchange. He can be reached at 513 721 6333. Ron is any attorney that specializes in LKE, knows his area well, and can brief you on what you need to know before deciding to explore this avenue further and defer the tax further out.

I mentioned the Tangible Asset regulations that take effect for 2012. It is similar to 283a for inventories where you have to add a portion of the cost to acquire the inventory to your inventory cost. Now they expect you to do the same for fixed assets, but also including not only the purchase cost but also improvement costs. Obviously, your rental fleets fall into this category. If you have questions about this you can e-mail me at gbartecki@comcast.net and I will get back you. The webinar we did on this topic took place on September 20 and I will report back to you regarding any unique questions.

Keeping in mind what I mentioned last month, you can spend a lot of money figuring out how to make this new regulation work or you can contact me and we will provide you with an industry specific solution to meet your needs and back it up when the IRS questions your technique.

Also a reminder that we inserted a Health Care Bill blog link for you to use for questions you have about the Health Bill and how it will affect your dealership. Feel free to use it, if for no other reason but to check out other answers you received.

By the way, I will be at the ProMat January 2013 show in Chicago and will be found in the MHW booth. If you have specific issues that need addressing that would be a good time to discuss them.

Garry Bartecki is a CPA MBA with GB Financial Services LLC. E-mail editorial@mhwmag.com to contact Garry.

 

 
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