The First State to Pass Right to Repair
In April of 2023, Colorado was the first state to pass the Consumer Right to Repair Agricultural Equipment Act (HB23-1011), also referred to as farmers’ right to repair. Effective January 1, 2024, this act now requires agricultural equipment manufacturers to provide owners or independent repair providers with the resources and information to repair their equipment. Previously, owners were required to have their equipment repaired with the original manufacturer.
Potential Impact in Other States
Other states throughout the country have pursued legislation related to the right to repair. New York and Minnesota have enacted the Digital Fair Repair Act, effective December 28, 2023 and July 1, 2024, respectively. Specific legislation enacted has generally applied to consumer electronics with exclusions being applied for auto, heavy equipment, and agriculture equipment manufacturers. However, the successful passage of legislation for consumer electronics could provide a framework that might be applied to other industries. More than 30 states considered some variant of right to repair legislation in 2023.
Implications for Dealers & Original Equipment Manufacturers (OEMs)
This continued passage of right to repair legislation is expected to have negative impacts on service revenue, preventative maintenance revenue, and warranty revenue. Conversely, parts revenue may see positive impacts with customers opting to purchase the parts and complete the repairs independently. Businesses facing a potential decrease in service revenue will need to determine ways to increase other sources of revenue, or limit costs, to maintain their growth and market share.
With these service lines making up a small portion of overall revenue, the impact on taxable items will be minute, mostly reserved to taxable-income-based limitations such as the utilization of net operating loss carryforwards and Section 179 expense. However, while there likely will not be many direct tax benefits or costs, the Act may still have significant impact on agricultural equipment manufacturers and dealerships. Dealers will want to confirm warranty obligations on equipment subject to the Act and coordinate with manufacturers to find new ways to continue offering high-quality service to their customers.
Proactive planning for new legislation will allow you to maintain agility in the marketplace and position your business for sustainable growth. For help with understanding the Right to Repair Act and how to navigate the changes to your business, please reach out to your Forvis Mazars professional.