Updates to the Motor Vehicle Fee for New Registration

In 2008, the legislature moved the then-use tax imposed on vehicle registration to Iowa Code section 321.105A and renamed it to the “fee for new registration.” The Iowa Department of Revenue (IDR) and the Iowa Department of Transportation (DOT) often field questions about confusing provisions from taxpayers seeking to register their vehicles as well as county treasurers tasked with collecting the fee. IDR received input from DOT before submitting revisions to Iowa Code section 321.105A to the legislature. The revisions were enacted by the legislature, signed into law by Governor Reynolds, and will take effect July 1, 2021.

These revisions will improve the administration of and compliance with the fee for new registration. In general, the changes are updates to remove unnecessarily confusing or limiting language. Some of the changes make certain exemptions from the purchase price operate more reasonably, such as trades between any lineal family members rather than limited to two generations and trades involving “entities” rather than “businesses.” An exemption from the fee that applied to certain business types transferring a vehicle to a newly created affiliate business was modified to apply the exemption to an entity regardless of its business type. The exemption for a leased vehicle applies if the vehicle is leased for at least six months rather than the current twelve months.

In addition to the changes to the statute, IDR will be publishing administrative rule revisions in the very near future to supplement the law. The administrative rules will include many examples, some of which were taken from the UT-510 manual. Once the rules are in effect, please discontinue the use of the UT-510 manual as guidance and refer to the rules instead. IDR will provide additional notice when the rules are in effect. To receive notifications of resources and guidance issued by the Department, subscribe to updates by selecting the tax topics of interest.