U.S. Rep. Rudy Yakym, R-2nd, has introduced legislation that would fix a mistake in the Tax Cuts and Jobs Act of 2017 that is costing the nation’s RV dealers millions a year.

It won’t be the first time that legislators from the area have tried to fix a problem that’s been lingering for years ― likely the result of a drafting error while the legislation was being adopted.

Congresswoman Jackie Walorski, who died in a car accident last August, and former Sen. Joe Donnelly, now serving as the ambassador to the Holy See, also tried to fix the issue that involves the deductibility of interest charges that RV dealers pay to maintain an inventory on their lots.

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When the tax legislation was passed, it allowed dealers to only deduct interest on the floor plans they maintain for motorized vehicles ― meaning cars, trucks, boats, jet skis, motorcycles and even motorhomes.

RV trailers, which now comprise about 88% of total sales, were inadvertently omitted from the legislation, meaning that dealers have been unable to deduct the expense over the past several years, which Yakym and co-sponsor Dina Titus, D-Nevada, hope to fix with a bill they recently introduced.

According to the most recent estimate, the nation’s RV dealerships were paying about $4.5 million a year in unfair taxes on the towable trailers in their floor plans because of the error, according to Yakym.

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That didn’t matter much over the past several years because RVs were being sold almost before they arrived at dealerships because of the demand surge caused by the pandemic when so many other activities were eliminated or restricted, Yakym said, adding that interest rates also were at historic lows for consumers as well as dealers.

But RV sales have been dropping since last summer, largely because of higher interest rates and waning consumer confidence. According to the RV Dealers Association, RV shipments dropped 52.1% to 109,816 through the first four months of the year compared to the same period last year. 

It’s a matter of fairness. But allowing dealers to write off the inventory tax also helps them save at least several thousand dollars a year at a time when sales are slumping because of the economy, Yakym said.

“As the representative from the RV Capital of the World, I know just how important the RV industry is both to our regional economy and our way of life in Indiana,” Yakym said in a release on the bipartisan legislation.

The Elkhart region builds about 80% of the nation’s RVs and employs tens of thousands of workers, so Yakym’s motivation is understandable.

For her part, Titus said the legislation would help the RV industry stay competitive with other elements of the recreation industry and possibly allow more people to explore Nevada and the remainder of the country.

Matt Rose, director of RVs for the Indiana Manufactured Housing Association-Recreation Vehicle Indiana Council, believes the legislation would be especially beneficial to smaller, independent dealers who are competing against nationwide chains and are likely operating on tighter margins.

Anything that helps RV dealers ultimately helps the manufacturers and suppliers, which employ about 50,000 Hoosiers, Rose said.

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“It might be a small thing in the grand scheme of things happening on Capitol Hill,” said Monika Geraci, a spokeswoman for the RV Dealers Association. “But it’s inequitable and directly impacts the industry by increasing costs for dealers.”

Officials are more hopeful that the legislative fix ― known as the Travel Trailer and Camper Tax Parity Act ― will have a better chance of succeeding this time around.

“I do feel optimistic about this issue,” Yakym told The Tribune by phone. “It wasn’t a problem because of low interest rates and inventory. Now it’s become a problem, and I’d expect a lot of RV dealers would get involved.”

Email Tribune staff writer Ed Semmler at esemmler@sbtinfo.com.

This article originally appeared on South Bend Tribune: Taxing problem: Yakym hopes to fix error that's punishing RV dealers