TRALA-Supported Washington State TRAC Bill Adopted by Legislature
The Washington State House passed Senate Bill 5032 yesterday and it is now onto the governor's desk for his signature. The Senate had passed it out of its chamber several weeks ago.
The State of Washington inadvertently eliminated its existing law authorizing and defining TRAC leases two years ago and TRALA has been working with the state legislature to re-enact the law to ensure TRAC leases continue to be viewed as true leases and not as a lending mechanism such as a bank would issue.
Terminal Rental Adjustment Clauses (TRACs) permit or require an upward or downward 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 TRAC vehicle leases is to provide a financial incentive for the lessee/user, who is the party to the transaction best able to control the maintenance of the vehicle, to keep the vehicle in good repair. TRAC vehicle leasing is limited by federal tax law to commercial business (non-consumer) leases.
One of the reasons TRAC laws are so important is to make clear during bankruptcy cases that TRACs are true leases so that leased trucks or equipment can be quickly returned to the lessor once a lessee has filed for bankruptcy. If a TRAC lease were to be seen as a bank loan, the vehicles could be held up in bankruptcy hearings and deliberations for months.
TRALA helped enact TRAC laws in the final three states that did not already have them adopted over the course of the past few years. When Washington's TRAC laws were accidentally eliminated, it created a situation where Washington stood as the only state in the U.S. without TRAC statutes on their books.
Senate Bill 5032 was introduced at the urging of TRALA and its allies, the American Automotive Leasing Association and the Equipment Leasing and Finance Association earlier this year. TRALA was then able to secure its member company, PACCAR Leasing, a seat before the Senate Committee on Law and Justice as well as the House Judiciary Committee. PACCAR Leasing's Olen Hunter testified on the merits of SB 5032 before both committees.
You may view a report on SB 5032 by clicking here.
TRALA wishes to thank both PACCAR Leasing as well as Larry Pursley of the Washington Trucking Associations for their leadership on this legislation.
If you have any questions regarding SB 5032 or TRAC leasing, please contact Jake Jacoby at email@example.com or at 703-299-9120.