Federal CARS Program “Rebates” and One-time Registration Fee

The Iowa Department of Revenue has received many questions regarding the proper treatment of the federal CARS program “rebates” for the purposes of calculating the amount of the one-time fee for new registration. We have reviewed the federal rules as well as pertinent Iowa law.

The Department’s position is that the federal rebate is not considered a trade-in under Iowa law. Rather, the federal rebate is a type of third-party payment made toward the purchase of the vehicle.

Because the rebate is not a “trade-in,” the 5% one-time registration fee should be based upon the purchase price of the vehicle, including the rebate amount.

In contrast to the federal rebate, any remaining salvage value on the car may be used by the dealer to lower the negotiated purchase price of the car. This would be similar to a manufacturer’s rebate or dealer incentive and would become part of the dealer’s negotiated purchase price. As such, this amount should not be included in the total vehicle purchase price when calculating the amount of the one-time fee for new registration.

For questions about calculating the one-time fee for new registration, please contact one of the following Taxpayer Services Specialists:

Greg Stokke
(515) 281-5769
Greg.Stokke@iowa.gov

Greg Lee
(515) 281-6885
Greg.Lee@iowa.gov

For more information about the CARS program, we recommend visiting http://www.cars.gov/. This Web site contains an interactive tool for determining eligible vehicles, a list of participating dealers and disposal facilities, response to FAQs, and information on how to determine the EPA combined fuel economy of trade-in vehicles. There is also a toll free CARS hotline: 1-866-227-7891.

Posted 07/29/09