WASHINGTON, D.C. — The National School Transportation Association (NSTA) spotted language in the new American Jobs Creation Act that it said could have been damaging to school bus contractors.

The tax bill contained a provision prohibiting sale-in lease-out (SILO) transactions, which allow tax-exempt entities to transfer tax benefits to a private entity. The NSTA found that the bill’s language expanded the definition of leases to include service contracts between private and tax-exempt entities, such as transportation contracts with public school districts.

According to Robin Leeds, industry specialist for the NSTA, this provision would have hindered contractors from using accelerated depreciation — as opposed to a straight-line basis — on their buses for tax purposes.

After discovering the potential problem, the NSTA secured an agreement with legislators to exempt school bus contractors from the new rules since they generally own their own buses and don’t conduct SILOs, in which a private company buys the assets of a tax-exempt entity and then leases them back.

The NSTA’s action came after the Senate Finance Committee passed the bill but before President Bush signed it into law on Oct. 22.