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October 14, 2004

USA: Closing tax loophole ‘could spur SUV sales’

USA Today newspaper reports that the ending of a tax loophole in the US could encourage a rush to purchase SUVs. The newspaper said that Congress passed and President Bush is expected to sign into law a corporate tax bill that would make sport-utility vehicles weighing more than 6,000 pounds subject to the same $25,000 tax break as other vehicles used by businesses.

By bcusack

USA Today newspaper reports that the ending of a tax loophole in the US could encourage a rush to purchase SUVs. The newspaper said that Congress passed and President Bush is expected to sign into law a corporate tax bill that would make sport-utility vehicles weighing more than 6,000 pounds subject to the same $25,000 tax break as other vehicles used by businesses.

The measure would close a loophole that lets business owners deduct up to $100,000 of the cost of an SUV if the vehicle was primarily used for business.

“There is enormous abuse of this provision,” says Senate Budget Committee Chairman Don Nickles, R-Okla, quoted in the newspaper.

The newspaper said that there is some industry speculation that the ending of the loophole will cause a rush to take advantage of it, although high gasoline prices mean that dealers are staying cautious on sales prospects for big SUVs.

“Dealers have used the tax break as a marketing tool in their advertising to generate sales,” says Ed Patru, a spokesman for the American International Automobile Dealers Association, USA Today reported.

Some observers say that there will likely be a rush to buy SUVs before the end of the year, the newspaper said.

Jeff Schuster, executive director of global forecasting for J.D. Power and Associates, agrees that SUV sales will pick up near the end of the year. “However, we don’t expect that this (tax) change will have a noticeable effect on the overall SUV market,” he told USA Today.

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