NOTE:  As provided in LFC policy, this report is intended only for use by the standing finance committees of the legislature.  The Legislative Finance Committee does not assume responsibility for the accuracy of the information in this report when used for other purposes.

 

The most recent FIR version (in HTML & Adobe PDF formats) is available on the Legislative Website.  The Adobe PDF version includes all attachments, whereas the HTML version does not.  Previously issued FIRs and attachments may be obtained from the LFC in Suite 101 of the State Capitol Building North.

 

 

F I S C A L   I M P A C T   R E P O R T

 

 

 

SPONSOR:

Silva

 

DATE TYPED:

02/10/03

 

HB

101

 

SHORT TITLE:

Motor Vehicle or Trailer Lease

 

SB

 

 

 

ANALYST:

Hayes

 

APPROPRIATION

 

Appropriation Contained

Estimated Additional Impact

Recurring

or Non-Rec

Fund

Affected

FY03

FY04

FY03

FY04

 

 

 

NFI

 

 

 

 

 

 

 

 

 

 

(Parenthesis ( ) Indicate Expenditure Decreases)

 

SOURCES OF INFORMATION

 

Responses Received From

Taxation and Revenue Department (TRD)

 

SUMMARY

 

     Synopsis of Bill

 

House Bill 101 adds a section to Chapter 66, Article 3, NMSA 1978 regarding lease agreements for a motor vehicle or trailer.  The new material states that a lease agreement does not create a sale or security interest merely because the agreement allows the lease price to be adjusted upward or downward with respect to the amount realized by the Lessor upon the sale or disposition of the vehicle

 

Effective date of the provisions of this bill is July 1, 2003.

 

     Significant Issues

 

1.  The bill states that if the sale or “other disposition” of a leased vehicle results in more or less money that the original “lease price” for the vehicle or trailer, then the dollar profit or loss will not create a security interest for the Lessor.

 

2.  The intent of this legislation is somewhat unclear.  Possible example: A traveler rents a vehicle while visiting New Mexico, signs a lease agreement for the vehicle (as required by rental car agencies), but drives extra miles or leases the vehicle for more days than the original lease.  The result would be extra fees charged to the traveler and more profit to the rental car agency.  Given that the lease agreement price has been adjusted upward in this scenario, how does it interface with this legislation if the Lessor later sells the vehicle?  

 

TECHNICAL ISSUES

 

“Lease agreement” needs to be defined.

 

POSSIBLE QUESTIONS

 

  1. If this bill is enacted, what would be the consequence to the consumer?  To the Lessor?

 

  1. Provide a real-life example of how a price “adjustment” of a leased vehicle currently creates a security interest to a Lessor.  What are the tax consequences?  Why does an adjustment in the lease price create a “sale” under current law?

 

  1. How does this bill remedy the perceived problem? 

 

CMH/njw