Testifying Monday, March 3 before an Internal Revenue Service (IRS) panel, AGC Director of Congressional Relations Phil Thoden urged the Service to withdraw its proposal to tax off-road, mobile machinery (such as a mobile crane) commonly used in construction.

"The proposal is not needed and is poorly-timed" said Thoden. "This tax change will only discourage new capital investments in construction equipment at a time when President Bush is pursuing economic policies to stimulate the economy."

Federal highway construction is financed through the Highway Trust Fund, and the majority of taxes paid into the Fund are those levied on motor fuel consumed by highway vehicles. However, the IRS has long provided an exemption from these taxes for "mobile machinery" that is primarily used off-road but may make minimal use of the highway system.

In June 2002, the IRS proposed to remove this exemption, which would subject currently exempt mobile machinery to the 12-percent federal sales tax, as well as a heavy vehicle tax and an excise tax on fuel and tires. This equipment has been exempt from these taxes because it makes only limited use of the highway system. AGC believes that the current exemption is still warranted. Additionally, the "stealth tax" is poorly timed as it comes only months after President Bush signed into law bonus depreciation to encourage companies to invest in expensive equipment such as mobile machinery.

For more information, visit www.agc.org/pressroom.

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