Iowa Widens RV Tax Grab

Owning a recreational vehicle is getting more expensive in Iowa.

tax grab imagesIt’s not that the price to buy a home-on-wheels is going up, but that the state is getting tougher on collecting registration fees.

State legislators tell RVers that since you’re rich, you can pay more. It’s time RVers paid their fair share!

In an earlier story I reported that the Iowa Senate approved a bill intended to prevent tax evaders (their words, not mine) from using out-of-state shell corporations to avoid paying registration fees on million-dollar recreational vehicles and other luxury vehicles.

In a later development this new rule affecting all current and future RVers was inserted in a catch-all bill approved by Iowa legislators.

As reported by The (Cedar Rapids) Gazette, the state has already recovered about $1 million in unpaid tax and registration fees and a law change that went into effect July 1 is expected to channel more revenue into the underfunded state Road Use Tax Fund.

“It’s well worth our time and effort,” Maj. Paul Steier of the Iowa Department of Transportation motor vehicle enforcement unit, said.

Okay, I think I finally get it! It’s a game to wring more and more out of the already overtaxed population. Tax grabs are simply a band aid solution to a larger problem. Could it be possible that the state has a spending problem?

nelson_haha2The DOT and Iowa Department of Revenue are going after Iowans who have established limited liability corporations in Montana to register their RVs there to avoid paying the 5 percent Iowa registration fee on vehicles and annual registration fees.

Montana does not charge sales tax, so it’s become a haven for RVers from numerous states who want to avoid this and other over reaching tax grabs.

We’re talking $5,000 on a $100,000 RV—and that may well be the tipping point for the already overburdened tax payer.

However, that’s a fraction of the penalty if an RV owner is caught registering the motorhome in Montana to avoid the Iowa fees. Steier said the Department of Revenue can slap them with a penalty equal to 75 percent of the purchase price.

John Barnes at the Montana Department of Justice doesn’t know how many Iowa vehicles are registered there because all the information he sees shows Montana addresses. Although Iowa may consider it illegal to register RVs there, Montana considers “it is lawful to establish an LLC for the sole purpose of titling and registering vehicles here.”

However, there are barriers to Iowans setting up sham LLCs to avoid registration fees, said Jeff Engelbart, co-owners and vice president of Lasso E RV Sales at Anamosa.

“I talk to (my customers) about the ramifications of licensing out of state. I just explain that the registration fee is to take care of roads and highways. It’s not like it’s disappearing into the general fund.”

Now try telling that to RVers who bump along I-80 as they across the state.

Iowa is not alone in cracking down on RV fee avoidance (I call it avoiding a tax grab).

The National Conference of State Legislatures reports California and Massachusetts have passed legislation to prevent citizens from taking advantage of Montana’s vehicle registration laws.

Since the mid-2000s, Iowa investigators have been working on their own as well as with colleagues from other states to catch folks trying to avoid the registrations fees, Steier said.

Sometimes it’s as easy as walking around the parking lot at a college football game to check on RVs with Montana license plates. Sometimes it is more difficult.

Once investigators uncover the owner’s true address and build a case, the information is forwarded to the Department of Revenue to collect the fees and penalties.

Old manSteier agrees with Engelbart that most Iowans want to do the right thing (i.e., pay more taxes). He also noted that toward the end of June — just before the new law went into effect, county treasurers reported RV owners coming in to ask about the change and how to be in compliance.

“Word has gotten out,” Steier said. “Hopefully, as time goes on, (we’ll) see fewer of those Montana plates.”

Apparently in Steier’s world it matters little that seniors have worked for upwards of 35 years contributing to the state economy and paying taxes and scrimping and saving in order to enjoy their senior years in the RV of their choice.

Worth Pondering…

In my many years I have come to a conclusion that one useless man is a shame, two is a law firm, and three or more is a congress.
—John Adams

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Are You Ready for Another Snowbird Tax?

In recent stories I reported that the governor of two northern states have declared war on the so-called rich snowbird.

NoNewTaxesGovernor Mark Dayton of Minnesota proposed a snowbird tax on residents who live 60 days to just under six months in the state.

Dayton told snowbirds that since you’re rich, you can pay more.

“It’s time snowbirds paid their fair share,” he stated.

In a separate story the Iowa Senate approved a bill intended to prevent tax evaders (their words, not mine) from using out-of-state shell corporations to avoid paying registration fees on million-dollar recreational vehicles and other luxury vehicles.

In the most recent development this new rule affecting all current and future RVers was inserted in a catch-all bill approved by Iowa legislators.

And now a third state proposes a plan to squeeze more tax dollars out of the so-called rich snowbird.

Nevada lawmakers are looking to see if they turn up more cash from snowbirds. Already the state mandates that anyone of the age of 10 who resides in the Silver State for more than 31 consecutive days must purchase a seasonal identification card at a cost of $12 (reduced to $7 for seniors).

However, if Nevada AB405 is passed into law, that mandated fee will jump to $17 for all, the RV News Service reported.

Relax and enjoy the beauty of Gulf State Park. © Rex Vogel, all rights reserved
Relax and enjoy the beauty of Gulf State Park. © Rex Vogel, all rights reserved

Even more odious is what’s hidden in the fine print in the bill: Bring a vehicle into Nevada, you’ll need a seasonal decal, at $18 per year. Bring your Class A motorhome and a tow vehicle, make the total decal bill $53.

The Nevada Assembly voted 40 to 1 to send the bill to the Senate for its consideration.

In an article carried by the Mojave Daily News, tourist promotion officials are shown to be more than a little concerned.

“Assembly Bill 405 reminds me of the issue with the RVers and dry camping back in 2006,” said Connie Davis, executive director of the Laughlin Chamber of Commerce.

“The economic impact that issue caused was tremendous, due to the fact that the RVers went national with the message that Laughlin doesn’t like RVs. To this day, we still haven’t recovered.

“Snowbirds and RVers bring in tourism dollars to Laughlin and the whole Tri-state area,” continued Davis.

“The perceived benefits from AB405 won’t outweigh the negative effects. Those folks will go spend their money elsewhere.”

The bill is the brain-child of sponsor Assemblyman Richard Carrillo, D-Clark County.

You may all go to hell and I will go to Texas.—David Crockett © Rex Vogel, all rights reserved
You may all go to hell and I will go to Texas.—David Crockett © Rex Vogel, all rights reserved

In an ironic twist, a view of Carrillo’s web page lists the Alliance of Retired Americans as one of his affiliations.

Just another one of those initiatives where politicians say “they’re rich, let them pay more.”

As one of “them” I can assure you I will visit another state before I will pay Nevada one dime.

The proposed tax grabs by the states of Iowa, Minnesota, and Nevada draw the contrast of what is happening in United States today. At least, let’s hope it is not a trend.

Maybe, it’s time to move to Texas!

Worth Pondering…

In my many years I have come to a conclusion that one useless man is a shame, two is a law firm, and three or more is a congress.
—John Adams

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Iowa Hides RV Registration Fee Tax Grab in Catch-All Bill

In recent stories I reported that the governor of two northern states have declared war on the so-called rich.

nelson_haha2Governor Mark Dayton of Minnesota proposed a snowbird tax on residents who live 60 days to just under six months in the state.

Dayton told snowbirds that since you’re rich, you can pay more.

“It’s time snowbirds paid their fair share,” he stated.

In a separate story the Iowa Senate approved a bill intended to prevent tax evaders (their words, not mine) from using out-of-state shell corporations to avoid paying registration fees on million-dollar recreational vehicles and other luxury vehicles.

Iowa Senator Tod Bowman, a Democrat from Maquoketa, said Senate File 364 will make it easier to crack down on those who deliberately evade paying registration fees.

The bill was approved on a 46-2 vote and sent to the House.

In the most recent development this new rule affecting all current and future RVers was inserted in a catch-all bill approved by Iowa legislators.

How will this new tax affect the lifestyle of Iowans? (Source: theveganmom.com)
How will this new tax affect the lifestyle of Iowans? (Source: theveganmom.com)

Bowman says it’s a crackdown on tax evasion, radioiowa.com reported.

“What this will do is close the loophole by addressing a sham or a shell fake (limited liability) corporation specifically being in place in the state of Montana,” Bowman says.

“We’re talking about million-dollar RVs or luxury vehicles that are being registered out-of-state, but they’re being driven in the state of Iowa, they’re maintaining residence in the state of Iowa, but they’re getting through this loophole and not paying their user fee.”

Montana does not charge sales tax, so people around the country have set up corporations in Montana to avoid paying their home state’s sales tax on the purchase of expensive motorhomes. Bowman says some Iowans are using that loophole.

“If you’re talking about a $25,000 vehicle, that might mean $2000, but if you’re talking about a million dollar vehicle, it’s $50,000,” Bowman says.

The proposal that has cleared the legislature makes it a crime for an Iowa resident who does not use their RV to do business for a Montana-based corporation to evade Iowa taxes by registering their motorhome in Montana. Bowman says motorhomes create wear and tear on the state’s roads just like other vehicles and the state sales taxes paid on motorhome purchases help finance road repairs.

“That money goes directly to our Road Use Tax Fund,” Bowman says.

“We all know the need in our Road Use Tax Fund.”

Sales taxes on motor vehicles and state taxes charged on motor fuel are deposited in the state Road Use Tax Fund, but officials say the fund is at least $250 million short of covering the amount of repair and construction needed in Iowa’s road system.

Some states have set up tip lines for residents to call in and report on neighbors who have an RV with Montana plates.

camper-bike-6This motorhome sales tax issue was included in a huge bill that cleared the legislature on its final day. Governor Branstad has the authority to item veto sections of the bill and he routinely refuses to say in advance whether he’ll approve or veto proposals.

The proposed tax grabs by the states of Iowa and Minnesota draw the contrast of what is happening in United States today. Maybe, it’s time to move to Texas!

Worth Pondering…

Even if the majority agrees on an idiotic idea, it is still an idiotic idea.

—Sam Levenson

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Iowa Senate OKs RV Registration Fee Tax Grab

In a recent story I reported that the governor of a northern state has proposed a snowbird tax on residents who live 60 days to just under six months in the state.

Lake Osprey RV Country Club on the Alabama Gulf Coast is a destination Luxury RV Resort designed for high-end RVs. © Rex Vogel, all rights reserved
Lake Osprey RV Country Club on the Alabama Gulf Coast is a destination Luxury RV Resort designed for high-end RVs. © Rex Vogel, all rights reserved

Governor Mark Dayton of Minnesota told snowbirds that since you’re rich, you can pay more. “It’s time snowbirds paid their fair share!”

Now another northern state has declared war on the so-called rich.

The Iowa Senate approved a bill intended to prevent tax evaders (their words, not mine) from using out-of-state shell corporations to avoid paying registration fees on million-dollar recreational vehicles and other luxury vehicles.

Sen. Tod Bowman, D-Maquoketa, said violators will face criminal charges and penalties under the legislation, which now goes to the House, according to a report by the Des Moines Register.

He said Senate File 364 will make it easier to crack down on those who deliberately evade paying registration fees. The bill was approved on a 46-2 vote.

Camping in O' Airy Zonie at Catalina State Park near Tucson. © Rex Vogel, all rights reserved
Camping in O’ Airy Zonie at Catalina State Park near Tucson. © Rex Vogel, all rights reserved

“These wealthy individuals have decided that they are above the law and don’t need to follow the rules the way the rest of us do,” Bowman said.

“I’m working to shut down this scam.”

According to Iowa law, a person who purchases a vehicle pays a 5% fee for new registration. The fee on a $25,000 car, for example, would be $1,250 while the fee on a $300,000 motorhome would be $15,000.

That money goes to Iowa’s Road Use Tax Fund to pay for the upkeep of our roads and bridges.

Apparently in Sen. Bowman’s world it matters little that seniors have worked for upwards of 35 years contributing to the state economy and paying taxes and scrimping and saving in order to purchase a higher end RV and enjoy their senior years traveling the country in a recreational vehicle.

Bowman said the scam works like this: “A wealthy Iowan purchases, for example, a million-dollar RV. Instead of filing the title in Iowa and paying the new registration fee, they register the vehicle in the name of a shell corporation in the state of Montana. Montana, unlike Iowa, does not charge a fee for new registrations. The scammer maintains their Iowa residency and has no other affiliation with the state of Montana outside the fake corporation. The vehicle is housed here in Iowa and used on our roads.”

Bowman said that since January 2011, the Iowa Department of Transportation’s Motor Vehicle Enforcement Office has referred for collection, investigations involving 36 out-of-state shell businesses created specifically to evade more than $827,000 in fees for new registration, plus Iowa title and annual registration fees.

Camping at Bay Colony RV Resort south of Houston. © Rex Vogel, all rights reserved
Camping at Bay Colony RV Resort south of Houston. © Rex Vogel, all rights reserved

The DOT’s Motor Vehicle Enforcement Office is also investigating another 14 out-of-state shell businesses involving 31 vehicles that owe more than $318,000 in new registration fees to Iowa. In addition, the office has pending investigations on another 60 out-of-state corporations, Bowman said.

Under current law, the Iowa Department of Transportation (DOT) can only issue a $150 simple misdemeanor citation if the scam is detected. The bill would change that starting July 1.

Under the bill, if investigators from Iowa’s Transportation and Revenue departments determine that a vehicle is owned by an out-of-state shell business, they will presume that the Iowan using the vehicle is the real owner and will notify them that they must title and register the vehicle in Iowa within 30 days.

A person who willfully evades payment of the fee for new registration is guilty of fraudulent practice. In addition to any criminal penalty, the person will be assessed a penalty of 75% of the amount of the fee unpaid and required to be paid.

“These scofflaws are stealing millions of dollars needed to pay for Iowa roads. That’s unfair to every Iowan who plays by the rules and relies on our roads and bridges for safe travel,” Bowman said.

The proposed tax grabs by the states of Iowa and Minnesota draw the contrast of what is happening in United States today. Maybe, it’s time to move to Texas!

Worth Pondering…

Even if the majority agrees on an idiotic idea, it is still an idiotic idea.

—Sam Levenson

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Are You Ready for a Snowbird Tax?

The governor of a northern state is proposing a snowbird tax on residents who live 60 days to just under six months in the state.

Minnesota in winter (Source: minnesota.publicradio.org)
Minnesota in winter (Source: minnesota.publicradio.org)

Spend most of the year in Florida, Texas, Arizona, or another Sunbelt state, and a snowbird smack down could be your new reality.

Governor Mark Dayton of Minnesota is proposing a snowbird tax as part of a larger tax grab by proposing to increase Minnesota’s personal income tax rate to 9.85% from 7.85% on income above $150,000 for singles and $250,000 for joint filers.

Minnesota’s income tax rate would be the country’s sixth highest.

Dayton tells snowbirds that since you’re rich, you can pay more. It’s time snowbirds paid their fair share!

Dayton, a Democrat, proposed the idea last month when announcing key parts of his proposed $37.9 billion budget.

He made a similar proposal last year that was defeated by the then-Republican-controlled legislature.

The plan would purportedly raise no more than $30 million over two years from all Minnesota residents who live 60 days to just under six months in Minnesota by taxing their capital gains and dividends as well as income from stocks and bonds.

The prorated income tax would largely hit older residents and retirees because they leave northern states to establish residency in such warmer places as Arizona and Florida.

Yuma, Arizona in winter © Rex Vogel, all rights reserved
Yuma, Arizona in winter © Rex Vogel, all rights reserved

According to Dalton’s logic it’s unfair that somebody can live six months and a day outside of Minnesota and pay no state personal income taxes, then come back and take advantage of “all the state has to offer for five months and 29 days.”

“This is a snowbird tax—absolutely,” he told reporters.

Apparently in Dalton’s world it matters little that seniors have worked for upwards of 35 years contributing to the state economy and paying taxes and scrimping and saving in order to enjoy their senior years in a warmer climate.

The purportedly first-of-its-kind tax would be difficult to enforce and is already facing opposing from state Republicans.

The hassle factor will be enormous, with the taxmen presumably demanding proof of location during the year via the likes of golf or restaurant receipts, reports Wall Street Journal.

When revenue invariably doesn’t meet expectations, maybe Dayton can require a GPS locator for grandma’s cellphone.

But raising revenue isn’t the point of this exercise. In the governor’s own words it’s about “unfairnesses”. The goal is to punish people for the sin of being able to afford to travel south for the winter.

“I don’t even think that’s constitutional,” Senate Minority Leader David Hann told the MinnPost.com.

“I don’t even know how you’d do that. (And) as far as I can see, there’s not a lot of money attached to it.”

FoxNews reports that a Florida Republican congressman is welcoming to his home state Minnesota residents who migrate south to escape the Midwest’s notoriously cold, harsh winters—now that their governor is trying to impose a so-called “snowbird tax” on them.

“Dear Governor Mark Dayton,” Rep. Trey Radel wrote.

Winter in Florida © Rex Vogel, all rights reserved
Winter in Florida © Rex Vogel, all rights reserved

“I’m writing today to thank you. As a Floridian, I am overjoyed to hear about your plan to raise taxes on Minnesotans, most especially the so-called ‘snowbirds.’ Your proposal gives us a chance to shine here in the Sunshine State.”

Radel, argues in the letter, which appear written with pointed sarcasm to skewer higher taxes, that southwest Florida would welcome more entrepreneurs and philanthropists investing in the region. And he cited such incentives as no income taxes, investment incentives for big and small businesses, and “great” public, charter, and private schools.

“It’s my sincere hope your plan has just driven many Minnesotans to become year-round residents of our great state,” he wrote. “I thank you for your policy.  It draws the contrast of what is happening not only in United States today, but the world.”

Worth Pondering…

Even if the majority agrees on an idiotic idea, it is still an idiotic idea.

—Sam Levenson

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