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Federal Issues

Bankruptcy Reform

In 2005, Congress enacted the Bankruptcy Abuse Prevention and Consumer Protection Act (P.L. 109-8). The Act contained two provisions specifically beneficial to the equipment leasing & finance industry: defaults based on non-monetary obligations and changes to the "ordinary course of business" rule.

In the defaults based provision, the Act clarified the debtor-lessee is obligated to perform all non-monetary and monetary obligations 60 days after the order for relief of all monetary/non-monetary obligations pending assumption or rejection of the lease. This is to help ensure constancy in interpretation of bankruptcy courts of section 365(b)(2)(D).

The second beneficial change makes it easier for equipment lessors to satisfy the "ordinary course of business" rule and keep rents paid within 90 days of the debtor-lessee's bankruptcy. Under this Act, if irregular rental payments from the lessee are viewed as coming within the 'ordinary course of business' in the industry then the lessor will be able to keep these payments.

 

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Energy:

The financing of renewable energy equipment and projects is emerging as an important component of the equipment leasing and finance industry. Rising energy costs coupled with energy security and climate concerns have increased national interest in renewable electricity generation. Continued growth in this sector is dependent not only on technological advances but also upon the continuation of governmental support for renewable energy technologies. Renewable energy production tax credits (PTCs) and renewable energy investment tax credits (ITCs) are prime examples of this support.

Following the passage of the Emergency Economic Stabilization Act of 2008 (P.L. 110-385) and the American Recovery and Reinvestment Act of 2009 (P.L. 111-5), the federal 30% investment tax credit (ITC) for solar property is available for projects placed in service by the end of 2016 and can be taken entirely in the year of placement in service. Additionally, the solar ITC is allowed to offset alternative minimum tax (AMT) and regulated public utilities are allowed to claim solar ITC and the previous prohibition on combining the credits with other subsidized energy financing has been repealed. Solar equipment has attributes that are particularly suitable for leasing. Solar assets are long lived assets and require high up front financing. Solar projects provide a predictable source of supply, a proven technology and low maintenance costs.

The production tax credit (PTC) for wind has been extended through 2012 and the PTC for biomass, geothermal and other non-solar renewables is extended through 2013. The ARRA allows eligible taxpayers to elect a 30% ITC in lieu of ten years of production credits and notably temporarily allows an elective conversion of a PTC or ITC into federal cash grants in amount of 30% of asset cost or the ITC amount. Thus parties have the option to forego tax credits and receive a check from the Treasury Department for 30% of the cost of the project.

ELFA In Action:

Guidance Materials:

 

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Financial Regulatory Reform

On July 21, 2010, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act (P.L. 111-203), which will have important implications for the financial services industry and the equipment finance sector in particular.

ELFA and its Financial Services Regulations Subcommittee of the Legal Committee focused on key policy issues that could directly affect the equipment finance industry: (1) the scope of the proposed Consumer Financial Protection Agency and its potential impact on the small ticket market; (2) the impact of the risk retention rules on the equipment finance syndications market; (3) the impact of the risk retention rules on the equipment finance securitization market; (4) the regulation of nonbank financial institutions and captive finance companies; and (5) the impact of the Equal Credit Opportunity Act reporting provisions. ELFA's objective is to have policymakers recognize the importance of the equipment finance sector to the capital markets and draw appropriate distinctions between the commercial finance sector and other financial institutions and products.

Since its enactment, ELFA has submitted responses to proposed rules from the Executive Branch and will continue to monitor its implementation to protect the interests of the leasing and finance industry.

Credit Risk Retention:

CFPB Actions

ECOA Data Collection:

Other Issues:

 

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Tax:

A bipartisan consensus is emerging that comprehensive tax reform is necessary and imperative to further economic growth in the United States. There is growing pressure for Congress and the President to address comprehensive reform to corporate and individual income taxes. The forces driving this need are rising deficits, expiring tax provisions, and concern of an unfair tax code.

ELFA supports broad tax reform that:

  • Promotes investment in productive assets
  • Ensures maximum flexibility in financing options for businesses
  • Provides neutrality and equality in application to owner-lessors and owner users
  • Avoids changes to reduce or eliminate interest deductions that increase costs of capital
  • Incentivizes investments to create economic and job growth
  • Promotes the global competitiveness of U.S. companies

Other tax provisions ELFA monitors:

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Transportation:

ELFA has worked on regulatory and legislative initiatives in the air, rail and marine equipment finance market segments. In the aviation arena, ELFA worked with the Federal Aviation Administration (FAA) and its Administrator on a new rule establishing a re-registration and renewal process for aircraft registrations effective October 1, 2010. In addition, ELFA worked with the FAA on possible revisions to Non U.S. Citizen Owner Trust Agreements.

In the rail sector, ELFA has worked with DOT on it "Rail Plan" for freight and passenger rail, its high speed rail program including the use of pool lease arrangements in high speed rail, its TIGER II (Transportation Investment Generating Economic Recovery) grant program and on public-private partnerships (PPP) in transportation in general. In the marine sector, ELFA has focused on provision affecting on finance lessors in the maritime space.

 Aviation:

 Maritime:

 IRS Guidance:

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