AMA seeks answers on which motorcycles qualify for a tax break

   Ed Moreland, AMA vice president for government relations, has written a letter to U.S. Treasury Secretary Timothy Geithner asking which motorcycles and scooters qualify for a tax break if purchased this year.

   Under the American Recovery and Reinvestment Act that was signed into law by President Barack Obama on Feb. 17, certain motorcycles and scooters are eligible for a tax deduction. It is up to the U.S. Treasury Department to write the rules that spell out exactly which vehicles qualify for the break.

   "As you know, President Barack Obama signed H.R. 1 into law on Feb. 17, 2009," Moreland wrote to Geithner. "Since then, many AMA members, dealers, and the public have made inquiries regarding the implementation of Section 1008 and Section 1142 and how they will affect the riding community."

   Moreland is seeking clarification on the following:
1. Which model years will be included: all unsold, new models regardless of year?
2. Does Section 1008 apply to the manufacturer suggested retail price or the final sales price?
3. Are off-road-only motorcycles to be included?
4. Will all-terrain vehicles be included?
5. Are scooters included that are not registered for on-road use?
6. Regarding hybrid scooters/vehicles that have plug-in battery power along with motive power, can the purchaser claim both the sales and excise tax deduction (Section 1008) and the 10 percent tax credit (Section 1142)?

   "In summary," Moreland wrote, "the AMA would appreciate a timeline relative to the issuance by the U.S. Treasury Department of its regulations delineating how Section 1008 and Section 1142 of H.R. 1 will be made available to the public.
"Each passing day without clarification by the Treasury translates into possible lost sales of certain motorcycles or ATVS by a confused public or dealer network," he wrote.

   After President Obama signed the landmark $787 billion stimulus package into law on Feb. 17, Moreland said he believed that many motorcycles and scooters would qualify for tax relief but that the full impact wouldn't be known until the U.S. Treasury Department fleshed out the law.

   He also thanked AMA members for responding to the AMA appeal to contact their legislators to make sure that motorcycles were part of the bill."

   Moreland said the efforts of Harley-Davidson, together with AMA, were instrumental in obtaining the same tax deduction that was provided in the stimulus plan for automobile, light truck and RV purchasers. The law also includes a 10 percent tax credit up to $2,500 for street-legal electric motorcycles purchased by December 2011.

The sales and excise tax deduction applies to motorcycles purchased between Feb. 17 and Dec. 31, 2009, with a GVWR (gross vehicle weight rating) less than an 8,500 lbs., and costing less than $49,500. Individuals can take the deduction if they make less than $125,000, or $250,000 for joint filers. The deduction is phased out for taxpayers with income between $125,000 and $135,000 ($250,000 to $260,000 for a joint return). Individuals do not have to itemize to claim the deduction.

What qualifies as a motorcycle in the economic stimulus law? According to section 571.3 of title 49, Code of Federal Regulations (CFR), a motorcycle is defined under federal law as "a motor vehicle with motive power having a seat or saddle for the use of the rider and designed to travel on not more than three wheels in contact with the ground." In addition, a "motor-driven cycle means a motorcycle with a motor that produces 5 brake horsepower or less."

   To illustrate the impact of the tax deduction, consider the case of a new motorcycle purchase of $10,500. For a 7.5 percent sales tax rate, the tax would be $787.50. To take advantage of the new law, purchasers would include that amount on their 2009 federal income tax return, meaning that their taxable income would be reduced by that amount before taxes are calculated. States set their own sales tax rates, so the actual amount of savings will depend on the taxpayer's state and tax rate.