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Iowa Senate says it is “cracking down on scamming in Iowa”

State capitol of Iowa
State capitol of Iowa

DES MOINES – Tax evaders using out-of-state shell corporations to avoid paying registration fees on million-dollar RVs or other luxury vehicles will face criminal charges and penalties under a bill approved by the Iowa Senate today.

Senator Tod Bowman of Maquoketa, chair of the Iowa Senate Transportation Committee, proposed Senate File 364to make it easier to crack down on those who deliberately evade paying registration fees. The bill was approved on bipartisan 46-2 vote.

“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.”

Under Iowa law, a citizen who purchases a vehicle pays a 5 percent fee for new registration. The fee on a $25,000 car, for example, would be $1,250. That money goes to Iowa’s Road Use Tax Fund to pay for the upkeep of our roads and bridges.

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.”

Under current law, the Iowa Department of Transportation (DOT) can only issue a $150 simple misdemeanor citation if the scam is detected. Senate File 364 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 be 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 percent 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.

Since January 2011, the DOT’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. Currently, DOT’s Motor Vehicle Enforcement Office is investigating another 14 out-of-state shell businesses involving 31 vehicles that owe more than $318,000 in new registration fees to Iowa. The office also has pending investigations on an additional 60 out-of-state corporations.

“As I’ve worked on this bill, I’ve appreciate the support from Iowans, as well as my Republican and Democratic colleagues in the Senate. I’ll work with members of the House to get it to the Governor for his signature.”

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