The ELFA celebrated the passage of the One Big Beautiful Bill that made permanent two long-standing priorities for the equipment finance industry: 100% expensing of equipment purchases, and EBITDA (rather than EBIT) based interest deductibility, which essentially allows for a higher interest expense tax deduction for highly leveraged companies.  The primary reason the ELFA pushed for these “permanent” (until a future Congress changes the rules) and preferential tax provisions is because it will incentivize investment in equipment.  This in turn increases equipment financing opportunities that will result in higher volume throughout the industry as all boats rise with the tide.

As the great American radio broadcaster Paul Harvey used to say…..”Now for the Rest of the Story”.   Many leaders in the industry that I interact with in both the Bank and Independent Lessor space want to increase their True Tax Lease volume.  That’s because True Leases (especially FMV Leases) are the most profitable products in every portfolio.  Why are they more profitable?  Simply because they offer more sources of revenue (and after-tax income) than an equipment loan or finance lease that only produces interest income.  In addition to interest income or operating lease revenue, true leases can also produce remarketing gains either through early terminations, renewal rents, or resale of the equipment.  It’s widely known that syndication fee revenue opportunities are greater with true leases versus loans.  Finally, 100% depreciation shelters shield most, if not all, of the lease payments from income taxes.  Another overlooked benefit of leases is the ability to restructure and extend a lease near the end of the term to amortize the residual and create new revenue streams.