Survey: Many Dealers Unaware of NCFC Tax Concerns
A survey commissioned by Protective Asset Protection shows many dealer principals are unaware of how the Trump tax cuts may affect participation program selection, particularly for noncontrolled foreign corporations.

Many affected dealers remain unaware of the implications of the Trump tax cuts on NCFC-style participation programs, according to a new study.
Photo by Michael Vadon via Flickr
CHESTERFIELD, Mo. — Protective Asset Protection, a provider of F&I programs, services, and dealer-owned warranty programs, announced today results of a recent survey it commissioned to gauge the pulse of owners of today’s largest automotive dealerships and groups on issues ranging from F&I product performance in 2018 to their awareness of the changing tax law on participation programs.
When President Donald Trump signed into law his Tax Cuts and Jobs Act for 2018, he also affected the profitability of dealer participation programs. Under the new tax law, auto dealerships have just a few months before having to make initial decisions on passive foreign income in connection with noncontrolled foreign corporations. According to the survey recently concluded by Protective, 43% of dealer executives are unaware of how the new tax laws are affecting accounting for NCFC business structures, and another 46% are unsure how it will be affected.
This is important since, according to the survey, approximately 53% of dealer executives said they utilize an NCFC as a participation program, and many dealer groups participate in NCFCs as a way to defer tax liability and participate in underwriting results, said Matt Gibson, vice president for Protective Asset Protection.
“Having worked with NCFCs myself for many years, I fully understand why dealers often chose this structure,” Gibson said. “However, the new tax law certainly creates uncertainty about the future of NCFCs. With other options available to dealers, now appears to be the time to look at alternatives, whether that be a retro, CFC or the DOWC. With a number of alternative dealer participation programs available, there is no need for dealers to gamble on uncertainty.”
There is also a lot at stake financially, Gibson added, noting that, according to the survey, 33% of dealer executives said the annual premiums of the F&I products they sell are valued between $500,000 and $1 million.
Originally posted on Auto Dealer Today
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