Susan L. Hodges 2017-01-20 06:20:48
How ELFA advocacy protects and preserves your business
THE DETAILS OF GREAT ACCOMPLISHMENTS ARE SELDOM SEXY. If, for example, we told you the nitty-gritty of how Chris Bucher was asked by a Louisiana lawmaker to educate her about how the state’s double tax on leased equipment was hurting the equipment finance industry and thousands of companies, you might not even finish this paragraph. But if we told you instead that Bucher’s work set in motion an effort to restore the sale-for-resale tax exemption—which, if passed as expected, will save Louisiana lessors roughly $110 million annually and make leasing viable again in the state—you might be impressed.
“This was a problem that affected nearly everyone doing business in Louisiana,” explains Bucher, Head of Equipment Finance at Whitney Bank Equipment Finance in New Orleans. “Lessors were being required to pay sales tax on equipment when they purchased it, and again when the equipment was leased. And since the tax could be passed through to customers, many businesses stopped leasing equipment as soon as the requirement went into effect—and this limited their financing choices.”
Fixing the problem required personal connections, expert strategy, “people on the ground” and a devoted public servant. All four came together like a mosaic in this small but critical piece of advocacy. Says Bucher, “The issue needed the right touch point, and it was the combination of joint connections, ELFA’s expertise and our local perspective that brought the solution.”
The public servant critical to the fix was State Representative Julie Stokes. When alerted to the issue, Stokes, who is a CPA and an expert in public policy, asked ELFA to educate her and offer her a meaningful solution. Stokes grasped the impact the issue was having on Louisiana businesses and has since championed the needed fix in legislation expected to be introduced and passed in 2017.
“While we are working hard to address the state’s budget issues and tax code, ELFA and their Louisiana members have played an important role in educating state officials as we tackle these issues,” she said in a statement on the matter. Stokes is a member of the Ways and Means and Appropriations Committees and Chairwoman of the Louisiana Sales Tax Streamlining and Modernization Commission.
The Big Picture
Advocacy work is nothing if not arduous and complex. The U. S. Congress alone comprises 535 elected legislators who produce some 10,000 pieces of legislation in a two-year period. At the state level, another 7,382 lawmakers in 50 jurisdictions produce roughly 180,000 pieces of legislation in a single year. In 2016 at the state level, ELFA identified, tracked and, where needed, addressed more than 1,630 pieces of legislation in 48 states and the District of Columbia. Throw in 50 governors, 50 state departments of revenue and 50 state capitols, and the job seems overwhelming at the least.
ELFA advocacy work is done by three on-staff government- relations professionals—Andy Fishburn, Vice President of Federal Government Relations; Scott Riehl, Vice President of State Government Relations; and Richard Shanahan, Director of Government Relations—as well as a vigilant legislation-tracking service and scores of member companies and allied partners who alert the association to potentially problematic legislative developments.
ELFA’s Scott Riehl and Rep. Julie Stokes
**“ While we are working hard to address the state’s budget issues and tax code, ELFA and their Louisiana members have played an important role in educating state officials as we tackle these issues.”
—Louisiana State Representative Julie Stokes
“We always encourage member companies to develop relationships with their elected officials at both the federal and state levels,” says Fishburn. “We think it’s one of the most important things ELFA members can do to ensure a legislative and regulatory environment that’s favorable to our industry.”
“Advocacy is a partnership between our political strategy, our connections and our members,” adds Riehl. “That ELFA members are highly competent and very giving of their time and expertise is a huge gift,” he adds. “When we identify an issue and work with committees to develop a strategy to deal with it, we reach out to members to join us where needed, and they always respond.”
Over the years, ELFA has developed an impressive array of advocacy volunteers who possess many types of expertise. Chris Bucher is one such volunteer; Christine Jensen and Jill Robertson are two others.
Tax-Sourcing Relief in Illinois
Jensen and Robertson, both from BMO Harris Equipment Finance Company in Milwaukee, recently helped score a home run for lessors in Illinois. First Jensen testified at a 2014 Illinois Department of Revenue hearing, explaining that a new regulation requiring local sales taxes to be paid, or sourced, to the location of equipment before a lease is signed, could not be complied with. Often at that point, she explained, lessors don’t know where the equipment is or even if it has been manufactured.
“My testimony was well received,” says Jensen. “Dennis Brown, former ELFA Vice President of State Government Relations, put together a number of important industry statistics that I used to convey the amount of leasing done in the state ($16.5 billion annually), the growth of the industry and how lessors and businesses were being affected. So often, legislators are unaware of our industry and the important role it plays in state economies.” Jensen then explained why the new requirement could not be reliably determined.
Sen. Pam Althoff, Scott Riehl and Sen. Toi Hutchinson
“ Equipment leasing and financing is very important to Illinois. ELFA has been a great partner in educating the state to the issues impacting their membership.”
—Illinois State Senator Toi Hutchinson
The following year, Robertson visited Illinois legislators’ offices to discuss the problem and was in the hearing room prepared to testify when the committee chair called for a voice vote, and it passed committee unanimously. The bill ultimately passed the Legislature without a vote against it and was signed by Gov. Bruce Rauner. The bill specified that local retail sales taxes would be sourced at the location of the equipment when first delivered to the lessee for its intended use.
“Receipts from leases are typically sourced to the location where the equipment is going to be used,” says Robertson. “The legislation as originally drafted wasn’t going to do that. The ELFA State Government Relations team helped to educate the legislators so that they knew this matter truly affected our industry and would have a deleterious effect on businesses leasing equipment in Illinois. Many of the legislators didn’t realize how much equipment is financed in Illinois, and once educated, they became more open to correcting the legislation. They simply hadn’t realized the unintended effect.” “Equipment leasing and financing is very important to Illinois,” said State Senator Toi Hutchinson, Chairwoman of the Illinois Senate Revenue Committee, when announcing the new law. “ELFA has been a great partner in educating the state to the issues impacting their membership.”
Creating the Vision
The belief that equipment lessors need to educate and influence legislators about their industry was what started the organization that is now ELFA in the first place. “It was 1961, and the Kennedy Administration was considering tax legislation that would do away with an investment tax credit some of our companies thought should be preserved,” says Ralph Petta, ELFA President and CEO. “Providing incentive for capital formation was something the industry wanted to support, but there was no way to do it without a formal organization. So volunteers founded our association 56 years ago in Milwaukee, where it stayed until the move to Washington in 1979.” It’s no exaggeration, then, that public policy on both the federal and state levels has always been ELFA’s top priority.
Eddie Gross, Shareholder at Vedder Price P.C. in Washington, D. C., personifies this priority. Gross has served as Co-Chair of the Air, Rail and Marine Subcommittee of ELFA’s Legal Committee for more than a decade. “I try to provide value by being a resource regarding legal issues and developments that affect or could affect our industry,” he says. “I try to be generally aware of those issues and developments, and when appropriate, seek guidance and consensus regarding potential advocacy matters with our Subcommittee members.”
Once an issue is identified, Subcommittee members discuss strategy, deciding whether and when the timing might be best suited to pursue the issue with ELFA leadership and its advocacy resources. “Ultimately,” says Gross, “the Subcommittee must determine whether the matter is currently situated to address by advocacy, or if the issue requires further analysis or a different political environment.”
If the issue seems appropriate for advocacy, the subcommittee establishes a position, may prepare white papers and other documents, and participates in the advocacy efforts. “Over the years, we’ve dealt with a number of existing or prospective laws and regulations with significant implications to lessees and lessors, and as a result of our advocacy efforts, industry concerns have been favorably considered and addressed,” Gross says.
Among the issues: FAA regulations requiring re-registration and renewed registration of U.S. registered aircraft, FAA “policy clarifications” on the use of trusts by non-citizen businesses and individuals when registering an aircraft with the FAA and, most recently, efforts to amend an existing Aircraft Liability Safe Harbor statute through bills in the House and Senate. Th e "Safe Harbor" amendment, if passed, would better protect passive lessors, lenders and trustees from liability if the leased or financed aircraft is involved in an accident while they are not in possession or control.
Don’t miss Capitol Connections, ELFA’s biggest advocacy event of the year, May 17–18 in Washington, D.C. Learn more at www.elfaonline.org/events/.
"These matters impact not only lessors and lenders, but also customers, investors, insurers and other participants in the aircraft markets," says Gross. "When we identify gaps, vulnerabilities or misconceptions in laws or regulations affecting our members, we start working on strategies to fix them." He reflects, "It's astounding how much work goes into studying a problem, figuring out the best way to fix it, and then reaching a consensus regarding drafting and implementation strategies to accomplish our purpose."
“ ELFA’s advocacy focus and success are extraordinary. This is the only association I’m aware of that has such a strong commitment to advocacy and is so effective at it.”
—Eddie Gross, Vedder Price P.C.
Defining Success
Victory may not always take the form of a complete win. Sometimes, having direct impact can make the final version of a law more palatable to equipment finance companies. "Because of our advocacy, the House Ways and Means Committee now realizes that interest deductibility is important for financial institutions and leasing," says Fishburn by way of example. "They realize that rules must be written in ways that don't negatively impact our industry.and without our advocacy, they never would have known that."
Most of ELFA's federal advocacy work is done with the U. S. Congress. "We do it through direct advocacy, in which the ELFA Federal Government Relations team goes to Th e Hill and represents the views of our membership, or through our grassroots program, where ELFA members are deployed strategically to visit various members of the House and Senate," says Fishburn.
ELFA members identify most of the issues that the association advocates for or against. Members contact Fishburn if the matter is federal, or Riehl if the problem concerns state law. "We then work through committee and board structures to determine which facets of a law really matter to our members so we can narrow it down to the two or three provisions that are most impactful," Fishburn says. "Next, we look at how we can have a broad impact by finding out if other trade associations are engaging on this. Sometimes we'll sign onto coalition letters, and when we don't see many people being vocal about a particular issue, we'll focus on them to add visibility."
At the state level, advocacy issues generally fall into five categories: lender's license, automatic lease renewal, data security, regulation of online lending, and consumer protection. Riehl doesn't expect those issues to change much in 2017. "We'll need the continued terrific support of ELFA members, and we always need new blood," he says. "Volunteers who are willing to discuss the impact of legislation, to draft comments or to travel with us to visit lawmakers are resources we can't do without."
Petta injects a sobering note. "To get something done on behalf of your industry and to allow your company to operate profitably, you need an advocate, an organization to speak on your behalf and be representative of collective voices on a particular issue.because if you're not at the table, you might be on the menu."
There's another aspect of advocacy that bears mentioning, and that is membership in an organization that conducts it. Belonging gives a company a voice in the issues advocated and the way that advocacy is carried out. Th ere is also the matter of fairness. A company that says it wants to drink at the fountain but lets others carry the water may at some point go thirsty.
The goal for ELFA has always been a level playing field so that leased and financed assets receive the same treatment as owner-operated assets on both state and federal sides of the public-policy arena. Chris Bucher, Christine Jensen, Jill Robertson and Eddie Gross are among the hundreds of individuals and companies who, along with ELFA's advocacy staff , make this effort a success.
"Like other associations I'm a member of, we benefit from networking, education and industry data and reports, but ELFA's advocacy focus and success are extraordinary," says Gross. "Th is is the only association I'm aware of that has such a strong commitment to advocacy and is so effective at it."
To learn how you can contribute to ELFA’s advocacy efforts, contact Andy Fishburn at afi shburn@elfaonline.org or Scott Riehl at sriehl@elfaonline.org.
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