A United States senator is drafting legislation to close a tax loophole that allows small business owners to write off $US25,000 or more when they purchase large SUVs, pickups and vans, the Detroit News said.


According to the newspaper, Senator Barbara Boxer, a Democrat from California, is proposing a bill that would make SUVs equivalent to cars for tax purposes, meaning they would be subject to stricter limits on depreciation.


Current US tax law law allows any vehicle that weighs 6,000 pounds or more to qualify as business equipment, permitting greater depreciation in the first year of a purchase, typically a deduction of more than $30,000 instead of less than $8,000 for a car, the Detroit News said.


Citing figures from New Jersey market research firm Autodata, the newspaper said that more than 4.2 million SUVs were sold in the US last year, up 6% from 2001, making them critical models in vehicle makers’ lines.


The tax office says it cannot determine how many small business owners are taking advantage of the tax loophole, the Detroit News added.

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The paper said Boxer’s proposed law would define trucks by separate cargo area rather than weight, allowing pickups and vans to qualify, but not SUVs. Any SUV weighing 14,000 pounds or less — every SUV on the market today — would be treated like a car.


In a letter to the Senate’s chief tax writer, Boxer argued that the SUV loophole distorts the market, “pushing up demand for the largest of all SUVs at a huge cost to the taxpayer,” the Detroit News said.


The newspaper said the vehicle makers, arguing that business equipment purchases can stimulate a flagging economy, plan a counter proposal that would make all vehicles eligible for the same kind of tax break as SUVs.

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