Involvement with leasing legislation
House and Senate Back in Session!
Posted 09/06/06
The Senate reconvened on September 5 and the House of Representatives reconvened on September 6 with the strong expectation that the Congress will recess by late September and reconvene for a lame duck session following the mid term congressional elections in November.
During the remainder of second session of the 109th Congress, a number of key issues affecting the corporate community in general and leasing and finance industry in particular await congressional action. The Congress is likely to revisit the repeal of the estate tax, an increase in the minimum wage as well as the extension of a series of expired or expiring tax provisions.
On the legislative front, ELA is continuing to pursue its legislative initiative to reinstate the binding contract transitional language for FSC/ETI which had been enacted in the JOBS Act in 2004 and then repealed in the Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA) which was signed into law in May of 2006. In addition, ELA is looking for an appropriate legislative vehicle to repeal the mid-quarter depreciation convention as contained in bipartisan Senate legislation (S. 2100) and its initiative to change the class life on medical equipment in order to allow tax-exempt medical institutions access to cost effective lease financing sources.
In the regulatory arena, ELA is following closely the implementation process for the Basel II Capital Accord which sets forth a new capital regime for internationally active banks. On September 5, the federal bank and thrift regulatory agencies requested public comment on proposed rules to implement the risk based capital requirements. These rules are expected to be finalized by mid 2007 with initial U.S. implementation scheduled for January 2008. On another regulatory matter, ELA continues to await PATRIOT Act regulations relating to the verification and identification of customers by "loan and finance companies" which by definition includes leasing companies. Finally, ELA is assessing the Interagency Statement on Sound Practices Concerning Complex Structured Finance Activities and its possible implications for the equipment leasing and finance industry.
ELA Submits Comments to the President's Advisory Panel on Tax Reform
On June 9, the Equipment Leasing Association of America (ELA), the trade association for the equipment leasing and finance industry, submitted public comments to the President's Advisory Panel on Tax Reform (67k). This bipartisan panel is tasked with making recommendations to the President by July 31, 2005 on how to reform the federal income tax code.
In the comment letter, ELA outlined the industry's key policy objectives and principles for federal tax reform. Specifically, ELA supports tax reform policies that:
- Promote investment in productive assets
- Insure maximum flexibility of financing options for asset acquisitions and business expansion
- Apply the rules equally to owner-lessors and owner users
- Promote the global competitiveness of U.S. companies
The comment letter points out that for the United States to have an efficient capital market it must have a diverse breadth and depth of capital. Leasing capital is distinguishable from and has a very different risk profile than either debt capital or business equity capital. The availability of all three types of capital allows businesses to better choose which risks to retain, which risks to transfer and which risks to share. This in turn makes the capital markets more efficient overall as a result. Finally, leasing is a critical tool that allows businesses to better manage their portfolio of business assets and guards against the obsolescence of equipment.
From an econometric standpoint, the equipment leasing industry provides $218 billion annually in equipment leasing and financing and holds $870 billion in equipment related assets. From 1997-2002, the equipment leasing and finance industry produced an additional $100-300 billion in gross domestic products while adding an additional $229 billion in equipment investment and creating between 3-5 million additional jobs. This econometric data for the industry is the most recent available as updated numbers should be available later this year.
For more information please contact ELA'S Vice President for Federal Government Relations at dfenig@elamail.com