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Leased-vehicle tax bill nears law

April 11, 2014
Illinois Gov. Pat Quinn reportedly is poised to sign into law on April 17 a measure to change tax calculations on vehicles leased in the state. If he does, the change would take effect Jan. 1, 2015.
House Bill 2317, under which vehicles leased for one year or longer would have sales tax owed calculated on the monthly payment instead of the vehicle’s selling price, unanimously passed both chambers of the state’s General Assembly and was sent to Quinn March 6. He has until about May 5 to act on the bill.
The Chicago Automobile Trade Association and the Illinois Automobile Dealers Association have made several runs at the taxation change on long-term leases, but officials with the Illinois Revenue Department always focused on near-term shortfalls in tax collection over long-term gains. Immediate gains would be seen in the proposed structure, under which dealers could not offer advance trade-in credits to their lease customers.
And with consumers enjoying lower monthly payments on leased vehicles, advocates project increased leasing activity.
Officials of the Illinois Revenue Department agree that Illinois should compute the sales tax in the same manner as 47 other states. The department indicated its position on HB 2317 to be positive.
If the change is made, revenues are projected to increase $14 to $28 million, based on forecasts of increased leasing activity. Lease transactions in Illinois currently are about half the number in nearby states.