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Leased-vehicle taxation bill nears passage; prepare to call state reps

May 24, 2013
SPRINGFIELD — A measure to change tax calculations on leased vehicles inched closer to Illinois Gov. Pat Quinn’s desk at this newsletter’s deadline, with senators poised to approve the bill. Under the change, sales tax owed would be based on the monthly payment instead of the vehicle’s selling price.
The House bill would have to return to that chamber for further consideration because the leased vehicle language was inserted as a Senate amendment to an otherwise innocuous move to allow Illinois homeowners to receive property tax bills via email.
Members of the CATA should prepare to contact their House representatives and petition for passage of House Bill 2317 before the General Assembly’s spring session adjournment, scheduled for May 31.
The Chicago Automobile Trade Association and the Illinois Automobile Dealers Association have made several runs at the taxation change on long-term leases (more than one year), but revenue officials always focused on near-term shortfalls in tax collection over long-term gains. Immediate gains would be seen in the current structure, under which dealers could not offer advance trade-in credits to their lease customers.
Nevertheless, consumers would enjoy lower monthly payments on leased vehicles which, in turn, would lead to 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. State lawmakers said they would not advance legislation to make the change without the department’s blessing; earlier this month, the department indicated its position to be neutral.
Lawmakers said they would not support a bill that reduces tax collection. But 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.
If the legislation clears the General Assembly and Quinn signs it, the taxation change would take effect July 1, 2014.