- The Washington Times - Friday, October 31, 2003

President Bush’s summer tax cut is prompting Washington area small-business owners to buy pickup trucks, SUVs and other equipment.

Maria Coakley David, chief financial officer of C.J. Coakley Co. Inc., bought five new $20,000 pickup trucks for the Falls Church commercial construction company a few weeks after Congress passed the tax-cut package in May.

The package raised the amount a small business, generally a company with fewer than 500 employees or $6 million in sales, can immediately deduct on business equipment, such as computers, copiers and telephone systems.

Businesses also can deduct purchases of vehicles weighing more than 6,000 pounds such as vans, pickup trucks and large SUVs. The amount allowed to be deducted was raised to $100,000 from $25,000.

“With the way we were able to expense the trucks, we could buy them all at once and write off the $100,000 rather than buy them gradually over a few years,” Mrs. David said.

The new trucks have boosted morale for some of the company’s 300 construction workers. The firm also has speeded up plans to replace a 12-year-old phone system, which will cost $30,000 to $40,000, she said.

“It shows our employees that we are growing,” she said.

The increase in tax deductions is a much-needed boost for small businesses, said Hector Barreto, administrator of the Small Business Administration.

“Business owners who have been uneasy about the economy now have an incentive to go ahead and make the purchases they need,” Mr. Barreto said, estimating that 500,000 businesses will benefit from the change.

Business owners tend to invest in new equipment at the end of the year to leverage payments and get better deals, he said.

Newth Morris, president of a Glen Burnie packaging and printing company, accelerated a long-term plan to install new equipment after the stimulus package passed.

Mr. Morris plans to install a $500,000 sheeter that holds large paper rolls and a $3 million printing press at Dixie Printing and Packaging Corp. by December 2004.

“Basically, it’s now feasible to get this equipment online in a relatively short period of time,” Mr. Morris said, adding that the new printing press will help the 95-employee manufacturer contend with overseas competition.

Lisa Painter, a controller for NVS Kitchen & Bath Inc., a Chantilly home-remodeling company, said the new expensing limit has changed her 2004 financial outlook.

NVS, which forecasts $6 million to $8 million in 2003 sales, plans to reduce some of its graphic-art costs by buying a new copier and purchasing another pickup truck before January, Mrs. Painter said.

“This will certainly help the company grow out of the small-business category,” she said.

SUV dealers say the increased deduction has brought more traffic from small-business owners. Congress, which originally intended the deductions for large trucks and vans, may make SUVs ineligible.

Glen Cardelino, product manager for the Capitol Hummer dealership in Greenbelt, said sales from small-business owners jumped in the past two months, though he did not provide figures.

Last month, Mr. Cardelino sold three H2 Hummers to small-business owners. They bought them with the intent to write off the purchases this year. The Hummers have base prices starting at $49,995.

“Things should really begin to get interesting in December,” when auto sales to business owners are traditionally higher, Mr. Cardelino said.

But tax adviser Andy Martin cautioned businesses against “buying blindly.”

“If using the deduction works for a business and it is affordable for the owner to expand, it would be foolish not to take advantage of it,” said Mr. Martin, who is a tax-services-products manager at the Columbia, Md. offices of Fiducial, a financial services company.

“However, business owners should be careful that they are not buying for the sake of a tax write-off, because it may be costlier in the end,” he said.

Business owner Joanne Sieloff said she spends too little on equipment, about $3,000 annually, for her commercial cleaning company in Chesapeake, Va., to afford the tax deduction.

“Sometimes, we don’t want to write off all of our expenses for the year because it’s easier for us to carry over some of the costs into next year’s income,” said Mrs. Sieloff, co-owner of Allclean Professional Services.

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