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42 DC VELOCITY SEPTEMBER 2018 www.dcvelocity.com
according to Rice. Previously, bonus
depreciation allowed buyers to write
off 50 percent of the value of new
equipment in its first year of service.
That has doubled, to 100 percent for
qualified equipment acquired and
placed in service before Jan. 1, 2023.
Bonus depreciation can also now
be applied to used equipment. But
some restrictions apply, as the saying
goes. Most importantly, you must
be the first owner of the used piece
of equipment, Rice points out. For
example, if you use a forklift under
an operating lease (i.e., transfer of
ownership is not included in the
lease) and you buy the residual lease
from the leasing company, you become
the first owner of what is now used
equipment and can write off 100 percent
of that residual value in the first year of
ownership.
In addition, changes to the U.S. generally accepted accounting principles
(GAAP) may affect those who lease forklifts. As Rice explains it, capital leases—
which depreciate over time, are counted
as debt, and typically transfer ownership
at the end of the term—are treated as
an asset on the company balance sheet.
By contrast, operating leases, which do
not involve transfer of ownership, are
currently treated as operating expenses
on the income statement. But effective
Jan. 1, 2019, that will change, as both
operating and capital leases lasting more
than 12 months will be treated as assets
on balance sheets.
These changes in depreciation and
accounting rules may cause some companies to revisit the lease vs. buy decision,
Rice says, but there are still situations
where leasing may be preferable. Much
depends on individual circumstances, she
says, adding, “We tell customers that
every company should consult their tax
adviser to understand what opportunities
these changes may provide to their organizations.”
TANGLING OVER TARIFFS
Both 2016 and 2017 set consecutive
records for U.S. forklift sales. So far, 2018
appears to be on the same course. Sales
are running higher than at this time last
year, according to Brian Feehan, presi-
dent of the Industrial Truck Association
(ITA). “All the economic forecasts we’ve
seen for 2019 are looking good as well,”
he says. “We’re hoping there are no major
disruptions.”
The potential disruptions Feehan refers
to could come from tariffs imposed ear-
lier this year by the Trump administra-
tion and from possible changes to the
North American Free Trade Agreement
(NAFTA). A 25-percent tariff on steel
from numerous countries, including the
United States’ biggest trading partners,
that took effect June 1 has raised produc-
tion costs for U.S.-made lift trucks and
