IRS proposal would end tax exemption for some mobile machines

A proposed Internal Revenue Service rule would end several tax exemptions for mobile machinery that can be used on roads, regardless of whether the equipment’s primary use is off-road.

IRS proposed the rule in June and has extended the deadline for comments from September 4 to December 4. The rule would affect mobile machinery vehicles with chassis that serve solely as permanent mounts for jobsite machinery. This equipment would be subject to the new vehicle excise tax — currently 12 percent of the purchase price — tire excise taxes and an annual heavy vehicle tax based on weight and capped at $550. In addition, tax credits, refunds and exemptions would no longer be available for the fuel these machines use.

According to the proposed rule, Congress’ assumption in 1956 that mobile machinery vehicles would make minimal use of the public highway is incorrect. IRS contends these vehicles carry their loads – typically heavy jobsite machinery such as mobile cranes – from one jobsite to the next over public highways.

Christian Klein, Washington counsel for the Associated Equipment Distributors, says the problem with the proposal is IRS doesn’t cite any studies or give any other data supporting its claim mobile machinery vehicles are using the highway system more frequently than in 1956.

“The IRS doesn’t have any evidence to support this thing,” Klein says. “Everything I’ve heard is that this machinery doesn’t make substantial use of roads.”

Owners of on-highway vehicles have paid taxes into the Highway Trust Fund since its inception. Money in the fund is used to build and repair the nation’s roadways. But Congress made an exception for vehicle chassis that serve as permanent mounts for jobsite machinery. The legislation said these vehicles would make minimal use of public highways and therefore receive minimal benefits from construction and maintenance of the roadway system.

Klein says another problem with the proposed regulation is it doesn’t clearly define which machines will be affected.

“It’s not like there’s a list of machines somewhere,” he says. “There’s a description of machines. It becomes sort of a subjective thing.”

Everything from oil derricks to mobile cranes could fit the description, Klein says.

He says contractors can help fight the rule change by sending comments to the IRS and copies of those comments to their representatives in Congress.

To view the entire rule, click the link in the right-hand column.