January 25, 2011

Dear Mr. Chairman:

I am writing on behalf of the 4,000 members of the American Rental Association (ARA).  ARA members rent construction and industrial equipment, tools, and party and event equipment to other businesses and the public from more than 7,500 locations throughout the United States.  ARA wants to commend you for beginning a dialogue in the Ways and Means Committee that is aimed at developing serious proposals for fundamentally reforming our Nation’s income tax code.

The equipment rental industry grew up in America in the days following World War II when young veterans came home looking for new opportunities.  The scarcity of tools that could be used to provide housing for the growing families of the baby boom was one of the main drivers of the early equipment rental industry.  ARA was formed by some of the early pioneers of the industry in 1955 and for the past 55 years ARA has represented and served the equipment rental industry. 

In the early years of ARA, virtually all ARA members fit under the title of small business.  However in the early 1990’s some large investors, as well as equipment manufacturers, began to drive a significant consolidation in the equipment rental industry that has resulted in the existence of several large equipment rental companies with rental revenues in excess of $1 billion annually and locations in virtually every state and several other super-regional players with annual revenues in excess of $250 million.

These developments mean that the equipment rental industry and ARA are made up of a diverse group of companies.  Most still are small businesses, about half of which organize as pass-through entities.  Others are large corporations that have equity and/or debt financing.  However, most of these large corporations are quite young and have very few exemptions of exclusions under the current tax code.

While the economic downturn has hit the equipment rental industry severely, we like the rest of the economy, are recovering slowly.  In 2008 the combined revenues of the equipment rental industry were $36.5 billion.  Our research partner, IHS Global Insight, estimates our 2010 revenues will come in at $27.9 billion.  However, IHS Global insight has forecast rental revenues for 2015 to be $45.1 billion.  While this is a significant recovery, we believe reforming the current tax code to one that has a broader base with fewer exclusions and exemptions and creates a competitive tax system for business will help the equipment rental industry meet or even exceed those revenue projections.

The benefits to the equipment rental industry from a more competitive tax system with fewer tax expenditures are clearly stated by you in your opening statement at the Committee’s January 20, 2011 Hearing on Fundamental Tax Reform.  Taxpayers “foot the bill” for tax code expenditures by paying higher rates.  ARA members are hopeful that the effort you have begun with this hearing will result in a competitive tax system that reduces compliance costs and strengthens the tax base.

ARA looks forward to working with you and other Members of the Ways and Means Committee as you develop proposals for reforming the tax code.  We begin by offering our full support to this effort.

Sincerely, 

John W. McClelland Ph.D.

Vice President Government Affairs
American Rental Association