Who speaks for dealers in Washington?
Freda Pratt-Boyer was just out of high school in 1972 and working at a hospital when a friend suggested she apply at Potosi, Mo.-based Purcell Tire & Rubber Co. Her first job in the tire business was computer input clerk.
Although Pratt-Boyer left Purcell for several years to pursue some personal interests, a request from Juanita Purcell brought her back in 1987 as company auditor. Over the course of her career, Pratt-Boyer has worked in retail, commercial, retread plants and wholesale distribution centers in managerial positions. She is now senior auditor for the company, which is No. 14 on the Modern Tire Dealer 100 with 69 retail, commercial and combination commercial/retail locations, five retread shops and two wholesale outlets.
Pratt-Boyer’s first experience serving the Tire Industry Association (TIA) was as a panelist in a session about women in the tire industry at the Specialty Equipment Market Association (SEMA) Show several years ago. She was elected to the TIA board in 2008 and became board secretary in 2012. Along the way to her current post at Purcell, she held many management positions. “My career has been centered on the business of Purcell Tire & Rubber Co.,” says Pratt-Boyer. The business of tire dealers like Purcell is affected by a variety of outside factors, especially legislative matters. As the new president of TIA, Pratt-Boyer is leading an association that works to protect the interests of its 7,000-plus members on legislative and regulatory issues at the state and federal levels.
Modern Tire Dealer asked Pratt-Boyer to describe TIA’s positions on the legislative issues that rank highest on the association’s radar for the next 12 months. The top four are the repeal of the estate tax, the elimination of the last-in, first-out (LIFO) inventory method, the Affordable Care Act and the federal highway bill.
TIA believes the estate tax hurts family-owned businesses because the cost of the estate tax comes from paying the tax and also from estate planning, says Pratt-Boyer.
“The estate tax applies to property transferred at death when the value of the property exceeds the estate tax exemption. Much of the value of family-owned businesses is tied to liquid assets such as land, buildings and equipment. This can force the new owner to sell the businesses’ assets to pay the tax.
“For many family-owned businesses to keep operating after the death of the owner, they must plan for the estate tax. Planning costs associated with the estate tax are a drain on business resources, taking money away from the day-to-day operations and business investment. These additional costs make it more difficult for the business owner to expand and create new jobs. Protecting family businesses from the estate tax is important in order to keep these businesses operating for future generations.”
Last year, TIA participated in a Capitol Hill press conference on the introduction of the “Death Tax Repeal Act of 2013” (S.1183/H.R.2429).
“Although we have made some progress in raising the levels of exemption and lowering of the overall tax percentage, we are continuing to make a strong push for full repeal.”
TIA supports the provisions in the American Taxpayer Relief Act of 2012, including a $5 million estate tax exemption, a provision to index the estate tax exemption, permanent lower tax rates and provisions for spousal transfer. “While these changes represent significant reform to the estate tax rules, TIA continues to believe that repeal is the best solution to protect all family-owned businesses from the estate tax.”
TIA is fighting proposals to repeal LIFO (last-in, first-out) tax accounting. Pratt-Boyer says repeal of LIFO would be an unprecedented retroactive tax increase which would have measurable negative economic consequences.
“TIA argues that no contemplated reduction in tax rates would be sufficient to offset the cost of LIFO repeal. That is particularly true for the hundreds of thousands of pass-through entities which pay tax on the individual side of the tax code, given the challenge the Senate Finance Committee and Congress face in lowering the individual rate to the same level as the corporate rate.”
LIFO is not a tax expenditure used by a single industry or small number of companies. It is an accepted inventory accounting principle that has been in use for 70 years, is used by more than one-third of companies including many TIA members, and is used by a wide variety of companies across manufacturing, wholesale distribution, retail and extractive industries. The use of LIFO to value a company’s inventory is in accord with Generally Accepted Accounting Principles. Moreover, it is well documented that inventories are already subjected to one of the highest incidences of taxation of any asset class in the Internal Revenue Code, according to Pratt-Boyer.
“LIFO allows those companies that use it to generate sufficient after-tax cash flow to enable them to purchase replacement inventory at ever-rising prices,” she says.
“Were they to have to pay tax on illusory inflation-generated profits, many would not have sufficient cash flow to purchase the replacement inventory necessary for them to remain in business; repeal of LIFO would very simply force a large number of companies to close their doors. That cannot be what tax reform is intended to do.”
The grim impact of repeal is a result of its unprecedented retroactivity, according to Pratt-Boyer. The overwhelming majority of the revenue that would be derived from repeal would come from the one-time “recapture tax” — the taxation of the LIFO reserves that companies have built during all the years they have used LIFO, some for many decades.
“Repeal of LIFO with a recapture tax would require every company now on LIFO to recalculate its taxes for every year that it has used LIFO, and pay back to the government the tax savings it derived — legally and properly — for each of those years.
“No other provision in the Internal Revenue Code is being discussed in this context. There is no plan to repeal accelerated depreciation, or the mortgage interest deduction, and require taxpayers to pay back to the government the tax savings from their use of those deductions. LIFO should not be treated differently. ”
Health care law
It appears the world of health care will continue to be dominated by the implementation of the Affordable Care Act (ACA), says Pratt-Boyer. She shares what TIA expects to see in the near future:
- Coverage premiums for many, in particular the young and healthy covered by small business health plans, will increase. Under rules beginning to take effect, plans with fewer than 100 participants can no longer charge higher premiums for employees with preexisting health problems and cannot charge older employees more than three times as much as they charge younger employees. While some older employees and employees with preexisting health conditions will see premium decreases, many small businesses with younger and healthier employees will see their premiums increase significantly.
- The essential health benefits requirements, i.e., the 10 categories of coverage that every qualified health plan will be required to have, go into effect in 2014. As was seen toward the end of 2013, health insurers may continue to drop people who have obtained coverage through the individual and small group market from existing plans that do not meet these requirements.
- The individual mandate, requiring that individuals obtain health coverage or pay a penalty tax, also goes into effect in 2014. The initial challenges raised by the individual mandate will carry over to 2015 when the IRS will have to determine the credits and penalties.
- Preparations will continue for the implementation of the employer mandate on Jan. 1, 2015. The employer mandate was originally scheduled to go into effect on Jan. 1, 2014, but was delayed a year, largely due to concerns about the reporting requirements for employers and insurers. New rules can be expected this year that will hopefully bring more clarity to exactly how the employer mandate will take form.
Pratt-Boyer notes that these highlights do not even begin to address the number of rules clarifying and implementing the ACA that have still yet to be promulgated and that might see movement in 2014. “Suffice it to say, even with the extreme heat it has been taking in recent months, the administration’s challenges with relation to the Affordable Care Act implementation are far from over. We foresee even more problems this year than last year in the implementation of the ACA.
“For instance, there has yet to be much focus on what it means to shift Medicare payments based on the number of procedures to ‘outcomes.’ To convert the way doctors and hospitals get paid may make sense but it is difficult to see what the long-term implications of such a major change will be for the health care system. Our job will be to make sure TIA members are represented in the upcoming discussions on the implementation of the ACA.”
Congress will attempt again in 2014 to enact a five-year federal highway bill. “If Congress tries to continue funding at current levels, it will have to choose among several unsavory options. While we support a long-term bill, we are opposed to many of the committee staff proposals being circulated.”
The proposals include: (1) a motor fuel significant tax increase with indexing for future adjustments up; (2) increased privatization of highways; (3) a national weight distance tax on truckers which would also eliminate the federal excise tax (FET) on new truck tires; (4) a vehicle miles driven tax on passenger vehicles; (5) the reinstatement of the FET on tread rubber used in the retread process; (6) reinstatement of the FET on passenger tires; (7) increase by 10% the FET on new truck tires; and (8) placing a sales tax on oil producers at the wholesale level.
Pratt-Boyer says TIA is taking two strong positions. The first is to eliminate diversion. “We are approaching 30% of the funds collected for the Highway Trust Fund diverted for non-highway purposes,” she says.
The second position is to engage creatively in future highway funding. Pratt-Boyer says TIA was an early supporter of legislation introduced by Rep. John Delaney, D-Md., The Partnership to Build America Act (H.R. 2084). The aim of Delaney’s legislation is to create large-scale financing of the nation’s infrastructure. ■
Meet TIA’s new president: ‘I have the tire industry in my soul’
Freda Pratt-Boyer grew up in Old Mines, Mo., in a large Catholic family with four brothers (three are deceased) and three sisters.
“Our family was in a tornado in 1969 and our father and one brother were killed in the event. Most of us were injured. This episode in our life taught us endurance and strength to overcome adversity at a very young age. We had a very strong life coach–our mother,” says Pratt-Boyer.
Her children are Christine Carlson (husband David) and David Boyer. “I have two beautiful granddaughters, Madelyn and Mallory.”
In 1972, the year Pratt-Boyer joined Purcell, the U.S. Senate passed the Equal Rights Amendment and sent it to the states for ratification, the first stand-alone issue of Ms. magazine was published, and Title IX, which bans sex discrimination in educational institutions that receive federal funding, became law.
The feminist movement was widespread in 1972, but Pratt-Boyer does not consider herself to be a pioneer. However, she acknowledges it was a challenge to gain the respect of men in the tire industry.
“I firmly believe a woman is a strong asset to any segment of the industry. She studies and works harder to learn the tire industry. She is astute to the needs of the customer and is more detail-oriented.
“The gender gap has greatly diminished, and today we see many women in management levels and working for manufacturers than ever before. I have overcome challenges just by holding my ground, working hard, studying hard, and being who I am.”
For Pratt-Boyer, the best thing about being a tire dealer is the business acquaintances, friendships established and customer goodwill. If she could change one thing about the tire retailing business, it would be the perception that going to the tire dealer is drudgery.
“Buying tires or having your car repaired is not the most glamorous thing you can do with your monies but we, the business associates of the industry, are here to serve the motoring public. We take a lot of pride in who we are and what we do and take the responsibility of taking care of the customer very seriously.”
Pratt-Boyer says she never wanted to work anywhere else than Purcell Tire.
“I can honestly say that I have the tire industry in my soul. I so enjoy what I do that I have not desired any other profession.”
If she could accomplish one thing as TIA’s president, Pratt-Boyer says it would be to highlight and renew the opportunities of the retread segment in the association.