What's happening
This bill amends tax law to clarify how terminal rental adjustment clauses in motor vehicle leases are taxed in New York.
Why it matters
Clarifies tax treatment for leases with terminal rental adjustment clauses (TRACs), ensuring any additional payment made at the lease's end increases the taxable amount, while any reduction allows a refund/exclusion from taxable receipts. This provides explicit guidance for both lessors and lessees regarding potential tax liabilities or credits when the final settlement under a TRAC is determined.
Aligns state tax law terminology and approach with the federal definition of TRACs, reducing ambiguity and potential disputes. This harmonization helps businesses navigate compliance more easily and may decrease the risk of conflicting interpretations between state and federal tax authorities.
Prevents lessors from receiving interest on refunds or deductions related to TRAC adjustments, potentially impacting cash flow for leasing companies. This provision means that while lessors can recover overpaid taxes if the TRAC payment is reduced, they won't earn interest during the period those taxes were held by the state.
Could influence lease structuring and negotiations for commercial vehicle fleets, as it clarifies the tax consequences of flexible end-of-lease settlements. Fleets and businesses that rely on TRAC leases for vehicles may find it easier to anticipate total lease costs and tax obligations in New York.
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Who cares
Motor vehicle leasing companies
The bill would let lessors exclude terminal rental adjustment decreases from taxable receipts on qualifying leases, without interest.
Business vehicle lessees
For qualifying leases certified as primarily for business use, increases in consideration under a terminal rental adjustment clause at lease termination would be taxable.
New York State tax administrators
The bill would establish explicit tax treatment for increases and decreases in consideration under terminal rental adjustment clauses in qualifying motor vehicle leases.
Headline styles
Tax Rules for Car Leases
Plain English, a few words. Used as the page title.
Sponsors
2 Co-sponsors
1 Multi-sponsor
History
- Print number 4070a
- Amend and recommit to ways and means
- Referred to ways and means
- Referred to ways and means
Companion bill
The same bill in the other chamber. A bill becomes law when one version passes both houses and the governor signs it, so either number can carry it.
Tax Rules for Lease Adjustments
In Senate Committee · Budget And Revenue · Sponsor Neil D. Breslin
Full text
2 pagesUnderlined is new[Struck] is removedOfficial text on nysenate.gov ↗
STATE OF NEW YORK
4070--A
2019-2020 Regular Sessions
IN ASSEMBLY
February 1, 2019
Introduced by M. of A. SCHIMMINGER, McDONALD -- read once and referred to the Committee on Ways and Means -- recommitted to the Committee on Ways and Means in accordance with Assembly Rule 3, sec. 2 -- committee discharged, bill amended, ordered reprinted as amended and recommitted to said committee
AN ACT to amend the tax law, in relation to terminal rental adjustment clauses in motor vehicle leases
The People of the State of New York, represented in Senate and Assembly, do enact as follows:
Section 1. Paragraph (B) of subdivision (i) of section 1111 of the tax law, as amended by chapter 20 of the laws of 1992, is amended to read as follows:
(B) Notwithstanding any inconsistent provisions of this subdivision, with respect to a lease of a motor vehicle described in paragraph (A) of this subdivision for a term of one year or more (1) which includes an indeterminate number of options to renew or other similar contractual provisions or which includes thirty-six or more monthly options to renew beyond the initial term, and (2) under which lease the lessee of such motor vehicle has certified in the writing described in clause (i) of subparagraph (C) of paragraph two of subsection (h) of section 7701 of the internal revenue code of 1986, under penalty of perjury, that the lessee intends that more than fifty percent of the use of such vehicle is to be in a trade or business of the lessee, all receipts due or consideration given or contracted to be given under such lease for the first thirty-two months, or the period of the initial term if greater, of such lease shall be deemed to have been paid or given and shall be subject to tax in accordance with the provisions of this subdivision. For each such option to renew, or similar provision, or combination of them, exercised after the first thirty-two months, or the period of such initial term, if longer, of any such lease, tax due under this article shall be collected and paid or paid over without regard to this subdivi-
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD07642-03-0
A. 4070--A 2
sion. If any such lease contains a "terminal rental adjustment clause" as defined in paragraph three of subsection (h) of section 7701 of the internal revenue code of 1986, (1) any increase in the consideration given pursuant to such clause upon termination of the lease shall be subject to tax, and (2) any decrease in the consideration given pursuant to such clause upon termination of the lease shall allow the lessor to exclude such amount from taxable receipts. No interest shall be allowed or paid on the execution of amounts from taxable receipts under this subdivision.
§ 2. This act shall take effect immediately.
Reflowed for reading: line numbers and page breaks removed. Cite the official text.
Summaries, headlines and scores are AI-generated from the official bill text. How we score bills. Source: NYS Open Legislation.