ELA Responds to Proposed Budget Legislation
February 10, 2004
On Jan. 13, 2004 the Treasury Department announced a series of legislative proposals, included in the president's fiscal year 2005 budget, for the purpose of closing loopholes, halting several abusive tax avoidance transactions, and simplifying the tax code. Of particular interest to the leasing community is the proposal: "Stop Abusive Leasing Transactions with Tax-Indifferent Parties."
A New Reality for Lessors in Synthetic Leasing Transactions
February 10, 2004
In a discussion of the Financial Accounting Standards Board (FASB) Interpretation No. 46, Consolidation of Variable Interest Entities, in the November 2003 issue of this newsletter, Jeffrey Ellis wrote that: "accountants will be struggling to implement the guidance in FIN 46 for a while longer." The multiple FASB staff positions issued, ongoing public comment, and lengthy discussions at FASB meetings concerning changes to existing guidance on consolidation of variable interest entities, continuing almost a full year after issuance of the rules, confirm his conclusion. The effective date for certain applications of FIN 46 was delayed until Dec. 31, 2003, but all of the Big Four firms continued to clamor for guidance. With that new deadline only days away, FASB issued FIN 46-R on Dec. 24.
Court Negates Revised Article 9
February 10, 2004
The law of consignment sales of goods — under which merchandise is delivered by a seller (a "consignor") to another person (a "consignee") to hold for sale to a third party — has long been a source of confusion and uncertainty for both consignors (seeking to protect their rights to their consigned goods) and creditors of the consignee (seeking to satisfy their claims against the consignee and its assets). Prior to the enactment in 2001 of revised Article 9 ("Revised Article 9") of the Uniform Commercial Code (UCC), the treatment of consignment sales had straddled both Article 2 of the UCC, which covers the sale of goods, and Article 9 of the UCC, which covers the creation and perfection of a security interest in goods. The drafters of Revised Article 9 sought to eliminate this confusion by removing all regulation of consignment sales from UCC Article 2, and lodging all regulation of consignments under the UCC (to the extent not covered by common law) squarely within UCC Article 9. However, the recent Bankruptcy Court decision in the case of In re Morgansen's Ltd., 302 B.R. 784 (Bankr. E.D.N.Y., Oct. 14, 2003) would, if sustained on appeal, negate many of the improvements introduced by Revised Article 9 and wreak havoc on the treatment of consignment sales of consumer goods and other "true" consignments not expressly covered by Revised Article 9.
In The Marketplace
January 01, 2004
Highlights of the latest equipment leasing news from around the country.
Proposed 4% Lease Tax Would Raise Cost of Leasing in Chicago
January 01, 2004
Cook County Illinois Board President John Stroger has proposed a new 4% lease tax. This tax is modeled on the Chicago Transaction Tax, which shifts the imposition from the lessee to a flat 4% tax on lessors (including nonpossessory lessors) receipts. The State Government Relations Committee Chair of the Equipment Leasing Association, Valerie Pfeiffer of CIT, reports that under this proposed tax, the only exempt lessors are governmental bodies, and lessors that are organized and operated exclusively for charitable, educational or religious purposes. The ordinance provides no exemption for government or other typically exempt charitable, educational or religious lessees.
Leaseback Deals Under Attack
January 01, 2004
As if the leasing industry needed another obstacle, a major one is now looming on the horizon, courtesy of Senate Finance Committee Chairman Charles Grassley (R-Iowa).
Repayments of Loans Made by Lessors Are Now Taxable Under Ohio Sales/Use Tax
January 01, 2004
In a recent administrative decision by the Ohio Department of Taxation, the commissioner held that the repayment of a loan of money should be added to the lease price of tangible personal property subject to the Ohio Sales/Use Tax. The case before the commissioner involved a loan that was made to a lessee to pay off its contract obligations to another lessor, so that the lessee could enter into a lease of new equipment with the new lessor. Both the loan and the lease were separately delineated in the Lease Agreement between the partners. The commissioner concluded that the repayment of the loan was an "expense associated with the leased equipment." As a result, the commissioner held that under Ohio R.C. 5739.01(H)(1), the separately stated refinance charge to pay the interest and principle on the loan could be included as part of the leased price paid for leased equipment making both amounts taxable under the Ohio Sales/Use Tax.
Update: Industry Awaits Regulations Under USA Patriot Act
January 01, 2004
This is an update to the article titled, <i>Industry Awaits Regulations Under USA Patriot Act,</i> published in the May 2003 edition of the <i>LJN Equipment Leasing Newsletter</i> (Volume 22, Number 4). As of this writing, the Treasury Department has yet to issue regulations relevant to the "loan and finance company" category of "financial institution."
A Guide to the Proposed Amendments to Article 2A
January 01, 2004
The American Law Institute (ALI) and the National Conference of Commissioners on Uniform State Laws (NCCUSL), the two organizations jointly responsible for drafting and updating the Uniform Commercial Code, recently approved proposed amendments to Article 2 — Sales, and Article 2A — Leases. The ALI approved the proposed amendments in May 2003 and NCCUSL in August 2002. These amendments are the culmination of a project that began more than 10 years ago.
