Sunday, October 7, 2007

Kicking the Home Team

Budget losers: Big 3, dealers
Automakers lose millions in refunds
David Shepardson / Detroit News Washington Bureau

WASHINGTON -- General Motors Corp. stands to lose more than $100 million in state refunds under the budget deal approved by Michigan lawmakers early Monday -- in addition to paying tens of millions of dollars in new service taxes.

In all, automakers and Michigan car dealers will lose $350 million in refunds of sales taxes paid on demonstration vehicles and defaulted leases since 1999. The state has not reimbursed the automakers because the issues have been wrapped up in court.

In a pair of rulings earlier this year, the Michigan Supreme Court upheld two separate decisions awarding the automakers and dealers of hundreds of millions of dollars in back tax refunds. Specifically, automakers and dealers are owed $250.2 million for demonstration vehicles, and $93 million for sales taxes on defaulted leases.

State legislators early Monday rewrote the laws to eliminate the sales tax exemption on demonstration vehicles -- which include vehicles test driven by customers at dealerships and management leases for automakers' white-collar employees -- and to bar automakers from collecting sales tax paid on defaulted leases.

The House Fiscal Agency estimated the loss in future years at about $60 million in annual refunds for the automakers and dealers.
In addition, the Detroit Three automakers stand to pay tens of millions of dollars in new taxes on services, among them consultants and administrative services.

The companies' lobbyists in Lansing privately expressed their unhappiness with several provisions in the budget deal. GM declined to say how much it stood to lose. "We're studying the tax package to better understand its overall effect," said Greg Martin, a GM spokesman.

Ford Motor Co. also said it was studying the budget deal. "We are still studying Michigan's new tax policy in order to understand the full impact it could have on business and manufacturing competitiveness in the state," spokesman Mark Truby said.

Chrysler LLC spokesman Jason Vines said the company supported the budget agreement. "Our tax guys are looking at it. Nobody is in favor of higher taxes but we're glad there's an agreement and the state isn't shut down," Vines said.

Liz Boyd, a spokeswoman for Gov. Jennifer Granholm, said it's not uncommon for retroactive tax decisions. She said a meeting was set for later in the week between state officials and automakers and their staff to discuss the ramifications of the new provisions.

"Our administration is very committed to our manufacturing sector and to the Big Three," Boyd said. "We understand there are concerns about the changes in tax policy."

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