MADA urges all of our members to attend our General Membership Meeting and Annual Legislative Reception in Annapolis on January 18, 2011.  This is our first chance to show the new legislators how important our industry is to the State.  We have great success on State Circle with our lobbying efforts, but recent history has proven that the grassroots efforts of dealers are often far more successful.  

Reserve your spot today by downloading a  registration form and returning it by fax, 410.269.1549, or by mail to:

 MADA

7 State Circle, Suite 301

MADA Chairman, Sam Weaver, Jr., presented the 2010-2011 Maryland Teacher of the Year, Michelle Shearer, with keys to her new 2011 Chevrolet Cruze on Monday, December 13, 2010.  An AP chemistry teacher at Urbana High School in Frederick County, Michelle won the highly prestigious award at a black-tie gala in October.  She will represent the state of Maryland at the National Teacher of the Year awards in April 2011. 

Michelle Shearer, MD TOY, with her new car.

Michelle and her husband both teach at the same school and will get great use out of their new car. "We really do need this vehicle because the one that we're currently driving has 225,000 miles on it, so it's surely on its last breath at some point," Shearer said. "This is not only a wonderful gift but a very practical gift."

MADA has long been a presenting sponsor of the Maryland Teacher of the Year program.  This marks our 11th year of providing a car to the winning teacher on behalf of all of our members. 

MADA member and Director, Jack Saum, Jr. and his heavy truck dealership recently hosted State Senator Ed Kasemeyer for a tour on December 7, 2010.  During the tour, they discussed issues such as fuel taxes, alternative power units, driver shortages, and workers' compensation costs.  Thanks to Beltway International for doing your part to ensure our members in the Legislature are aware of the issues that face our industry.

MADA reminds all dealers to contact any purchaser for whom you were required to file a Form 8300 (Cash Reporting) in 2010. Each purchaser should receive notice by January 31, 2011, that your dealership has filed the form with the Internal Revenue Service. The IRS has been strictly enforcing the filing of Form 8300 cash reports, and a failure to report cash transactions over $10,000 could result in a minimum $25,000 fine.

The statement must show the name and address of the dealership, the total amount of the reportable cash received, and indicate the information was provided to the IRS. Don't forget to keep a copy of the correspondence for your own records. We have provided a sample letter below, but the exact wording of the customer notification should be reviewed by the dealer's legal advisor.

Dear (customer name):
We are required by the Internal Revenue to report transactions involving more than $10,000 in cash and "cash equivalent" under the provisions of 26 U.S.C 60501. (Name of dealership) has filed a Form 8300 with the IRS on (month, day, year) indicating that you provided us ($ amount) in connection with the purchase of your (year, make, model). We wanted you to know that we have complied with this federal requirement. Again, thank you for your patronage.
Sincerely,
(dealership name)

The FinCEN Form 8300 general instructions and the IRS definition of "cash" are available on the IRS website.

Effective January 1, 2011, the standard mileage rates for the use of a car, van, pickup, or panel truck will be:

- 51 cents per mile for business miles driven

- 19 cents per mile driven for medical or moving purposes

- 14 cents per mile driven in service of charitable organizations

The business standard mileage rate cannot be used for any vehicle used for hire or for more than four vehicles used simultaneously. 

On November 9, 2010, the IRS put an end to three years of uncertainty for dealers by issuing new guidance for applying the Uniform Inventory Capitalization rules (UNICAP) under section 263A. In 2007 the IRS determined that dealers were producers and were required to capitalize all direct and indirect costs associated with the purchasing, handling and storage of inventory. Application of the guidance provided by the IRS required complex calculations and resulted in substantial additional taxable income for many dealers.

 The new guidance provided by the IRS allows dealers to change their UNICAP method of accounting to one of two safe harbor methods; the retail sales facility safe harbor method and the reseller without production activities safe harbor method. Each method provides different benefits for dealers and the adoption of each should be considered.

 Retail sales facility safe harbor method:

This election allows a motor vehicle dealership to treat its entire sales facility, from which it normally and routinely conducts on-site sales to retail customers, as a retail sales facility. This election also eliminates any issues related to classification of dealer trades, lease sales, or internet sales being classified as wholesale transactions or off-site sale.  A motor vehicle dealership using the retail sales facility safe harbor method is not required to capitalize handling and storage costs incurred at its retail sales facility.

 Reseller without production activities safe harbor method: 

This election allows a motor vehicle dealership to treat itself as a reseller without production activities. Activities that a motor vehicle dealership or a contractor perform on dealership owned vehicles and customer owned vehicles are handling activities which are not required to be capitalized, to the extent they occurred at the motor vehicles dealership's retail sales facility.

Some challenges still exist for dealers who perform work at locations other than their main dealership facilities. The new rules only apply to locations visited by customers. Dealers who use facilities away from their main retail facilities will need to review their operations to determine what activities will be covered under these new rules. However, by changing to either or both of these accounting methods dealers will be able to exclude most if not all handling and storage cost from their capitalization calculations.

These new rules provide for automatic consent for change to the safe harbor accounting methods if the change is made for either the first or second tax years ending after November 9, 2010. The rules also provide audit protection of prior UNICAP methods if the safe harbor methods are properly elected.

A copy of this bulletin may be downloaded for printing here.

 -Reprinted courtesy of James A. Tortorella, CPA

Executive Vice President, Councilor, Buchanan & Mitchell, P.C.