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Truck Renting and Leasing Association

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TRALA Supported TRAC Lease Bill Introduced in New Mexico Legislature

TRALA-sought legislation to address Terminal Rental Adjustment Clause (TRAC) leases has been introduced in the New Mexico Legislature. Roberto "Bobby" Gonzales introduced House Bill 72 on January 16th after speaking with TRALA and other key industry leaders about the problem that our industry faces with TRAC leases in New Mexico.

TRAC leases permit or require an up or down adjustment of rent to make up for any difference between the projected value of a vehicle and its actual value upon lease termination. The objective of these leases is to provide a financial incentive for the lessee to control the maintenance of the vehicle and keep the vehicle in good repair. TRAC vehicle leasing is limited by federal tax law (26 U.S.C. 7701(h)) to commercial leases only.

Thanks in large part to TRALA's efforts in North Carolina and Kentucky over the past two years, TRAC statutes have now been passed in 49 States and the District of Columbia – leaving only New Mexico yet to enact clarification legislation. These statutes have made it clear that TRAC vehicle leases are true leases and not sales or security interests for state law.

The impact of these TRAC statutes has proved particularly helpful to TRALA members in bankruptcy cases, by supporting the “true lease” status of TRAC leases when the lessee is in Chapter 11-bankruptcy reorganization. True lease status gives the lessor a greater right to recover full current rental payments from a bankrupt lessee, and it may entitle the lessor (unlike a secured creditor) to return of the vehicle so that it can be re-leased to another lessee.

HB 72 is currently in the House Business & Industry Committee awaiting committee action. TRALA is committed to helping move HB 72 forward in this legislative session and will continue to lobby in its favor over the next several weeks.

To view a copy of the legislation please click here.

If you have any questions about this bill, please contact Jake Jacoby at jjacoby@trala.org or at 703-299-9120.