President Bush recently signed H.R. 5140, The Economic Stimulus Act of 2008 to address short-term economic uncertainties and to put money back into the hands of American workers and businesses, spurring future growth. In total, the impact of the stimulus package amounts to more than $152 billion, or about one percent of Gross Domestic Product.
According to the American Rental Association, two specific provisions in the stimulus package will affect rental companies and their equipment purchasing decisions in 2008. Americans will see an enhancement of section 179 and a 50-percent bonus depreciation allowance, ARA says.
Enhancements to section 179 include the amount at which business owners can expense on new purchases made in the 2008 tax year. Under current law, a maximum amount of $128,000 is allowed to be expensed on the purchase of qualified property that did not exceed $510,000. With the enhancement under the stimulus package, the government is increasing the expensing limit to $250,000 with the total qualified equipment purchase increasing to $800,000. This means a reduced tax liability on new equipment, allowing for more dollars to be spent in the current tax period.
The 50-percent bonus depreciation provision allows taxpayers/business owners to increase the amount of depreciation deduction in the 2008 tax year. This means that in addition to the normal depreciation of equipment in year one, any purchase made in 2008 will be eligible for 50-percent bonus depreciation. For example, consider a five-year asset with 20 percent in normal depreciation that costs $30,000 when purchased in 2008. This equipment is eligible for $15,000 (50 percent) in bonus depreciation, plus $3,000 in normal depreciation of the adjusted basis of the equipment after bonus depreciation ($15,000) for a total of $18,000 in depreciation for the current tax year.
Businesses that qualify for the section 179 enhancement can also take advantage of the 50-percent depreciation allowance on property they do not expense under section 179. However, all property must meet the following conditions to qualify:
· Property to which modified accelerated cost recovery system applies with a recovery period of 20 years or less;
· New property purchased after Dec. 31, 2007; and
· Property placed in service before Jan. 1, 2009
There are some special exemptions to these qualifications for certain narrowly defined types of property. Most rental businesses will purchase property that will meet these qualifications, but all business owners are advised to check with their tax professionals to determine the rules that apply to specific purchases.
“We are very excited about what the stimulus package means for the future of the rental industry,” said Christine Wehrman, executive vice president and CEO of ARA. “There has been much uncertainty about growth potential and the purchasing of new equipment, so this is welcome news. The fact that President Bush signed the bill into law during The Rental Show was fantastic timing for exhibitors and show attendees.”
In other association news, ARA announced that the Global Rental Alliance, which held its annual meeting in Las Vegas, during The Rental Show, collectively agreed to further explore the concept of an International Exchange Program. The focus on such a program would be to continue building awareness of the rental industry worldwide, provide opportunities for individuals to learn about careers in rental and to build goodwill among participating organizations.
Part of the funding for the exchange will come from a recent $10,000 contribution made to the ARA Foundation on behalf of Kennards Hire in Sydney, Australia. Additional details are still being discussed among the Alliance organizations, but it is hoped that the program will be introduced toward the latter part of 2008.
The Global Rental Alliance consists of seven independent equipment rental trade associations that have joined together to increase the understanding and concept of rental worldwide. They include: the Hire Association Europe, Hire and Rental Industry Association Ltd., Australia; Hire Industry Association of New Zealand; DLR, France; Canadian Rental Association; European Rental Association; and ARA, United States.
ARA also last week announced the results of the 2007 customer satisfaction survey for ARA Insurance Service, its wholly owned insurance subsidiary. Each year for the past four years a study is conducted and prepared by Synovate, a global market research company.
The survey was conducted from Nov. 11-21, 2007, and approximately 200 AIS-insured customers were polled from across the country. Member businesses surveyed were a well-represented mix of the three rental industry segments: party and event; general tool and equipment; construction and industrial. Additionally, the group of businesses polled denoted various revenue levels and AIS contacts.
According to the results, 2007 marks the strongest performances to date relative to ARA member experiences and satisfaction with AIS representatives, products and services.
Key findings in the report show that AIS excels at the quality of its insurance products and services, makes it easy to access the people customers need to contact, and has effective risk management information and resources. Timely delivery of quotes, endorsements and service, along with claims handling and loss control issues also received high scores.
For more than 30 years, AIS has provided ARA members the opportunity for affordable insurance. Headquartered in Kansas City, Mo., ASI is a managing general agency representing Praetorian Financial Group.