Wednesday, September 29, 2010
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Tax and Credit Act of 2010 will increase Tax Leasing
The Small Business Jobs and Credit Act of 2010 is finally law. The ACT increases for 2010 and 2011 the amount of investments that businesses would be eligible to immediately write off to $500,000, while raising the level of investments at which the write-off phases out to $2 million. Prior to the passage of the bill, the expensing limit would have been $250,000 this year, and only $25,000 next year. In addition the 50% bonus depreciation has been extended through 2011. Under the Recovery Act, 75 percent of capital gains on key small business investments this year were excluded from taxes.
The Small Business Jobs Act temporarily puts in place for the rest of 2010 a provision called for by the President – elimination of all capital gains taxes on these investments if held for five years, and The bill would allow certain small businesses to “carry back” their general business credits to offset five years of taxes – providing them with a break on their taxes for this year – while also allowing these credits to offset the Alternative Minimum Tax, reducing taxes for these small businesses.
Some of the highlights include:
Higher SBA loan limits. The maximum size of an SBA-backed 7(a) loan rises from $2 million to $5 million, and 504 loans rise from a maximum of $1.5 million to $5.5 million. Loan fees for these stay gone for the 2010 tax year now, after earlier being eliminated for '09. This will increase franchise business expansion, bringing along leasing with it, as well as creating more business for those who supply the franchisee, who also will lease more equipment, software, and vehicles.
There's a 100 percent exclusion from capital gains tax for angel and venture-capital investors on small business investments. This is a growth mode and will be of help to the leasing community.
A write-off of up to $10,000 of startup expenses for new businesses, and a new deduction for health-insurance costs for the self-employed.
A business can take any credits their business has and apply them against any of the previous five years lives on in this bill, as does Section 179 (depreciation) expensing of up to $500,000 in the year of purchasing business equipment. As noted earlier, the "bonus depreciation" of another 50 percent of the equipment cost also got renewed.
How is all this going to affect commercial equipment leasing? Clearly any small business that needs tax deductions will be inclined to use bargain purchase option leases to preserve their right to the new incentives. The real incentive to use bargain option leasing comes from the right to “carry back” losses for five years. However how far back does small business need to go to find much taxable income. Also what impact will this have on the deficit? Big business usually has a lot of tax deductions and it is the small and middle size firms that pay a lot of taxes.
Once again with this many tax incentives a lot of small and middle firms with limited current income will need tax leasing so they can receive a payment reduction by allowing the lessor to use the 50% bonus depreciation. This will create a lot of tax leasing so you need to get current with the income tax rules. It will also create a need to find funding sources that have tax appetite, or have a lot of financial institutions re-enter the market. We have seen a lot of tax lessor’s leave the industry the last few years. Also the 100% advance required on tax leasing is less attractive to the financial markets today. We may be back to the time when selling tax leasing is harder to the funding sources than the lessee’s.
How much will this do to stimulate the economy? It remains to be seen. Speculation is that there has been a buildup of used equipment that has to be replaced because companies have been repairing and stretching out the use until the economy comes back.
While profits have been increasing some companies have been sitting on some cash, whether they want to keep this and insure their working capital by leasing, is perhaps the smarter move.
This is all very positive, rather than just sitting around and being negative and complaining how bad things are. You don’t see Larry Ellison doing that or Microsoft or GE and many companies are becoming more aggressive.
I applaud the provisions of the Small Business Jobs Act of 2010 signed into law by President Obama that should help spur investment in plants and equipment, which is a key ingredient in capital formation, economic growth and productivity.
On the other hand, I still think an ITC on American made goods would have been a better incentive.
Mr. Terry Winders, CLP, has been a teacher, consultant, expert witness for the leasing industry for thirty years and can be reached at firstname.lastname@example.org or 502-649-0448
He invites your questions and queries.
Copy of H.R. 5297:
Leasing News Editorial
(This ad is a “trade” for the writing of this column. Opinions
### Press Release ##############################
Merrilees Joins RTR Services
RTR Services Inc. a nationwide company servicing the banking and equipment finance industries for over 20 years has hired Jim Merrilees, CLP, as Vice President.
Mr. Merrilees has thirty-seven years of professional experience in commercial leasing and related industries. He has held senior management positions for both equipment leasing and service providers to the industry.
Mr. Merrilees is a past board member of Equipment Leasing and Finance Association, as well as president of the National Equipment Finance Association and Certified Leasing Professional Foundation.
Mr. Merrilees has a BS degree in Finance from Miami University in Oxford, Ohio and an MBA from Pepperdine University in Malibu, California.
RTR Services Inc. is in the business of recovering, remarketing, inspecting and appraising equipment for lenders. RTR Services Inc. has primary offices in Salem, Oregon, O’Fallon, Missouri, Phoenix, Arizona, and Raleigh, North Carolina.
“We feel that the addition of Mr. Merrilees to our senior management team will continue to build upon our growth and success as a company. He will be based out of the company’s corporate office in Salem, OR”.
(Merrilees was selected by Leasing News readers to be one of the top 25 most influential persons in Leasing:
(“Jim Merrilees, CLP, first to develop a ‘wide area network’ BLISS before the days of the internet. Steered the Pegasus dealer program, and under his watch a computer credit scoring profile for both vendor and broker business in a highly quick process. The internet version of BLISS, BLISSnet, was created long after Jim had left the company. Where I see Jim's ‘influence’ is through his contribution to the issues found in the industry.”)
#### Press Release #############################
Commercial Equipment Lease, Eugene, Oregon for Sale?
July 30th the FDIC closed LibertyBank, Eugene, Oregon with Home Federal Bancorp, Inc., Home Federal Bank, Nampa, Idaho taking over the assets, which also included Commercial Equipment Lease, Eugene, Oregon.
In an interview with Len E. Williams, President/CEO, Home Federal Bank, he was very complimentary about the management of the leasing company by Jim Johnson, which has been in business for 35 years. The company is a specialist in the small ticket market place with a very successful and proven origination process.
Evidently the bank changes it minds as brokers have been cut-off, and there is to be no new business. Commercial Equipment Lease is primarily taking care of its portfolio. No one has informed Leasing News if leasing company or its portfolio is for sale.
A reader told Leasing News:
"We and their other brokers got a letter from them when it happened saying they were ceasing operations and not funding anymore & I know almost all the employees are gone and a couple of employees that are left are gone at the end of October."
Out of Broker Business or Business Altogether
These are companies who are either out of business who worked
with independent equipment leasing brokers or no longer are
doing business with independent equipment brokers within
the last year. This is not a list of companies who do not do
business with independent equipment brokers.
To find the stories about this company, please go to our archives, perhaps do a search “sort by
First Trillion to Open in November!
As reported in July the formation of First Trillion in Columbia, South Carolina, is true, although at the time denied by Dwight Galloway, formerly president of LEAF Specialty Finance, that he was directly involved. He did state that he had the “blessings” of LEAF Financial to work on the sale of the company or portfolio.
A deal was almost together, but fell apart, it is reported. Ron Elwood, Marketing Coordinator, First Trillion Funding, LLC, made this announcement:
“We are excited to announce the formation of First Trillion Funding, LLC. FTF will provide funding nationwide for brokers and lessors through its office in Columbia, South Carolina. The funding source will offer application-only financing up to $75K and commercial and franchise financing to $250K. Although a new entity, First Trillion will be operated by an experienced team of managers and many experienced credit, funding and servicing experts already well known to most of the broker/lessor community. The team expects to begin funding in November.”
Perhaps those that attended the NAELB Meeting in Atlanta, Georgia learned more as Dwight Galloway was in attendance, where he participated in the funding panel as an individual. At this point, he is not an employee of Trillion. He is also not an employee of LEAF Financial.
Certainly the team that Galloway said was the best ever, had been with him a long time, is staying together, and Trillion will be funding leases before the end of the year, according to Ron Elwood.
Letters? We get eMail!
Leasing 102 by Mr. Terry Winders, CLP
"I just had to comment on Terry Winder's column on “Leasing Document Closing Procedures” in today’s Leasing News. I believe the industry really needs a wake-up call on how badly it has treated so many lessees. Your column always gives great advice and hopefully more will get it and move away from predatory practices and waive or amend unnecessary provisions that cause so many problems.
"As a lender that does not discount any residual we are never-the-less determined to be the 'bad guys' because we didn’t remind the lessee of the notice period and now are being billed for an additional year even on a $1.00 option.
“While we always contact the Lessee to confirm the terms and acceptance of the equipment I now believe we need to become more proactive and confirm specific lease provisions, such as end of term written notice which will cause issues down the road."
Bob Robichaud, CLP
Sales makes it Happen---by Kit Menkin
"I enjoyed reading your sales make it happen today. I think your assessment is dead on. This is just the beginning of good things come (I Pray). We booked only (1) operating lease so far in 2010, while growing our portfolio 38% year to date.
“Our industry will have no choice but to adapt to the proposed FASB changes as well as modify our business models somewhat to compensate for the upcoming changes."
Kyle W. Gilliam
Bank Beat---Why they closed down six More Banks
"Large influential developer convinces small Regional’s to participate in $100MM spec loan?? I have heard (and witnessed) that scenario a few times over in the last 8-10 years. Developer with huge ties to the community approaches his buddy bankers, they calculate the returns, their bonuses, their probably promotions, and RISKS of not participating on said loan: wink:
"I had the displeasure of being present in such a meeting (at the local Country Club) where basically the participation was pitched to several bankers and the ramification of not participating was basically being blacklisted from future smaller and local financing opportunities. Thankfully the Bank I worked for was large enough and strong enough to politely tell him to go pound sand… He ended up assisting in the take down of 3 community banks and two large ones are still looking for their money.
"This happened in a State about as far away geographically from Georgia you can get but it sounds all too familiar.
"Great write-up Kit."
(name with held)
"Nice reporting...and critically important work that you're doing. Thank you."
Oct. 13 AZELA Meeting
"St.Clair as our guest presenter, with a focus on S.B.A. Lending.
"I attached the flyer as a PDF and a Word file.
Bernice Truszkowski, CLP
Donna Mount Back--
"After a departure from leasing for the last year, I have thankfully restarted my 21 year long love of leasing and have joined with Ed Anderson of Leasing Specialists and Jay Coles of Selco Business Finance. I am doing municipal, federal, tribal and commercial leasing again! I wanted you to know my whereabouts and I wish you continued success for the last quarter of 2010. Please let me know if I may be of assistance to you in any way."
"I am writing to advise you that I will be leaving Charter Capital, Scottsdale, Arizona, and my last day will be this Friday, Sept. 17th. I have decided to resume my career in the information technology industry. I have accepted a position with my former employer, CA (Computer Associates) and will be managing strategic software partnerships in the western US.
"My six years at Charter Capital have been wonderful and I truly appreciate the opportunity to work with Rick again. My partners, Rick and Carey Wilbur, will continue to manage the company and I appreciate the good work that you provide the leasing industry with Leasing News.
"All inquiries and other Charter business should be directed to Carey Wilbur, 480-874-5402, email@example.com or Rick Wilbur, 480-874-5400, firstname.lastname@example.org. Thanks again Kit."
Broker Referral Exchange
"Kit I agree that the new program Brokers helping Brokers place deals in their area. I have placed in excess of $2,000,000 dollars in leases for brokers in 2010 just friend that I knew and that needed help in our area. This has been and will be a major funding area for brokers.
“I have always advocated we needed a mix of national funders and local banks with so many of the national funders shutting the door on brokers our local connections have kept us and our friends going.
“Thanks for your support."
John L. Winchester, CLP
Allied: Why did the banks fall for the alleged $87 fraud?
"You have clearly explained the leading cause of why these fraudsters continue to perpetuate their illegal activities, some without feeling the wrath of their wrongful actions. I could not agree more with you. In fact, back in 1984 when I was a young commercial lender at the then Continental Illinois National Bank, we uncovered the largest fraud in Chicago banking history when I innocently ran some UCC searches on one of the banks existing clients by the name of Grabill Corporation, then owned by the CEO, the infamous Billy Stoecker from the south side of Chicago. We caught Stoecker triple financing the same assets from the same borrowers with three different banks on the same day.
“As a lender at this modest community bank having assets of only $100MM, I always thought it was highly unusual that this client showed up with a stretch limo and an armed guard. He just did not fit our normal local profile. I was more accustomed to a local contractor showing up with concrete on his boots than a slick suited, body guarded CEO of a conglomerate of otherwise very viable and legitimate, small businesses.
“Upon confirming the fraud, we quickly forced him out of the bank. However, despite our warnings to the local community, he continued to perpetuate an even greater fraud upon even more banks over the next 10 years until the whole thing blew up. Why? Because exactly as you said, two things were prominent in his successful fraud strategy:
"1. A legitimate accounting firm (Laventhol and Horwath), who later failed completely due to their inability to properly confirm assets that never truly belonged to Grabill and;
"2. Banking community that entirely looked the other way and did not listen to their instincts when everything just looked too good to be true.
"Keep in mind, this Grabill CEO started as a tiny remodeler of old homes on the south side of Chicago and within just 10 years amassed a consortium of sophisticated companies having nearly a billion in revenue including a very large defense contractor that he acquired. Again, violating the “too good to be true” theory.
"A third lesson we learned was to finance entrepreneurs that have demonstrated experience in a relevant industry. That remains one of our firms primary underwriting criteria and it has served us well as we, (knock on wood), as we have avoided every single financial fraud in our industry, (from NorVergence to today’s Allied Health Care Services), since our company’s inception in 2000. All are simple lessons that bankers forget when times are good and even, like today’s disturbing fraud trend, when times are very bad and companies are under extreme financial pressure from our troubled economy."
“This type of information has value because it basically gives the reader an understanding of the securitization process - how deals are structured. Leaf had to over collateralize the deal by 7.5% in cash and assets... attached is something I thought was interesting. This is the info on how Leaf put together their last $175M securitization."
LEAF Rating Report:
Bring Back the Investment Tax Credit
"The ITC editorial was great. I seriously doubt I will ever see ITC again in my career, but it would truly incent companies to modernize and grow. This country is doing nothing to create new jobs and growth overall. All I see is companies looking for ways to cut back, spend less except at the top levels of management, so they can build their bottom-line and pay bonuses. It is nothing more than window dressing.
“Don't get me wrong, I think companies need to be frugal and watch spending, but the things I see are a disincentive for most workers to work harder to live the American Dream. At the end of the day however it will all come back to haunt us as the economy continues to slow and the middle class withers away.
"Thanks for your news letter, I really enjoy it."
Mark F. Ritter
Dancing with the Stars-Obama/Palin
“Which is the star?”
((Please Click on Bulletin Board to learn more information))
Leasing Industry Help Wanted
Please see our Job Wanted section for possible new employees.
Larchmont, New York ---Adopt a Dog
“Bartok looks like a mini German Shepherd mix. He is 2 years old and weighs about 28 lbs. Bartok is a wonderful dog who loves to get belly rubs and lay next to his foster mom on the couch. He is completely housebroken, very calm in the house, and does not chew on furniture. He gets along well with other dogs and ignores the cats in his foster home. Bartok loves to go running with his foster dad and makes a great hiking partner. He would do best in an active home with older children (12 and up).”
Adopt-a-Pet by Leasing Co. State/City
Adopt a Pet
Judge doubles US Bank patent verdict to $54MM
Treasury bond yields hit new lows on economy fears; gold tops $1,300
Marlin's Daniel P Dyer sells 3,701 Shares
Chesswood Income Renewal of Pawnee Credit Facility
Icahn folds in Vegas/Holding fire sale at Fontainebleau
Top 10 most expensive real estate markets in the US
Brown, Whitman clash over solving state's economic woes
Cal to cut baseball, gymnastics and lacrosse
Steve Jobs hires Bill Gates' architect for new house
An Economy Tour of Rhone Syrahs
Japanese wine cartoon makes Bordeaux grower famous
Harvest Tweet across Nation
A growing industry gets better with age: New Jersey wineries flourish
US/International Wine Events
Leasing News Wine & Spirits Page
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