HBA-RBT H.B. 2567 76(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 2567 By: Cuellar Ways & Means 4/1/1999 Introduced BACKGROUND AND PURPOSE Currently, there are state and federal requirements to operate certain vehicles on alternative fuels. A person or company purchasing a vehicle capable of operating on alternative fuels or retrofitting vehicles to run on alternative fuels pays a premium for the vehicle as compared to the same vehicle manufactured to operate on gasoline or diesel. The price differential exists due to the relatively small number of vehicles manufactured to operate on alternative fuels, as well as the cost of the additional equipment used in retrofitting a vehicle to run on propane or natural gas. Accordingly, in an effort to comply with clean air requirements or to save money by using alternative fuels like propane and natural gas, which are cheaper domestic fuels, for a person or company faces a higher sales tax liability. The higher sales tax liability acts as a disincentive for use of alternative fuels vehicles. Additionally, persons operating liquefied gas-propelled motor vehicles pay the comptroller of public accounts (comptroller) between $30 and $744 annually through a decal tax, depending on the weight of and distance traveled by a given vehicle. Liquefied gas includes compressed natural gas (CNG), liquefied natural gas (LNG), and liquefied petroleum gas (propane). A sales tax exemption could encourage conversion to alternative fuels. A liquefied gas tax exemption would also provide incentives for the purchase and use of natural gas and propane vehicles. Many local government and private fleets are interested in using clean-burning alternative fuels, but often lack the funds necessary to pay the initial investment for these vehicles. Also, since the alternative fuels refueling infrastructure in Texas is not fully developed, funds are needed to build more refueling facilities to accommodate growing fleets. Counties throughout the state could use the funds generated by the additional "local-option" vehicle registration fee authorized by this bill to fund alternative fuels projects supported by their communities, including, but not limited to, fleet conversions and building refueling stations. H.B. 2567 creates incentives for the use of alternative-fueled vehicles and for the development of projects that promote alternative fuels. This bill exempts for four years all persons and entities, whether public or private, from paying: a sales tax on the difference in price between an original equipment manufacturer (OEM) vehicle that runs on gasoline or diesel and one that is manufactured to run on natural gas, propane, ethanol, methanol, or electricity; a sales tax on the cost of materials for retrofitting a conventionally fueled vehicle to run on natural gas, propane, ethanol, methanol, or electricity; a sales tax on qualified clean-fuel vehicle refueling property; and the decal tax on vehicles that are propelled by liquefied gas. These exemptions serve as incentives for the purchase of alternative fuel vehicles and building of refueling infrastructure. Additionally, this bill creates a funding source for alternative fuels projects in counties that choose to implement them. It helps develop alternative fuel markets in counties that have air-quality problems or a strong interest in alternative fuels but that lack local matching funds. Counties could leverage money in clean-fuels funds by matching federal Congestion Mitigation and Air Quality (CMAQ) or other grants, such as State Energy Conservation Office grants. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Subchapter H, Chapter 151, Tax Code, by adding Sections 151.333 and 151.3335, as follows: Sec. 151.333. PROPERTY USED TO CONVERT MOTOR VEHICLE TO USE CLEAN FUEL. Defines "clean-burning fuel" and "qualified clean-fuel vehicle property." Provides that the tax imposed by this chapter does not apply to the sale of qualified clean-fuel vehicle property used to convert a motor vehicle property used to convert a motor vehicle so that the vehicle can be propelled using a clean-burning fuel either exclusively or interchangeably with another motor fuel. Provides that this section applies only to the conversion of a motor vehicle that was manufactured not earlier than the 1996 model year. Provides that this section expires September 30, 2003. Sec. 1151.3335. CLEAN-FUEL VEHICLE REFUELING PROPERTY. Defines "qualified clean-fuel vehicle refueling property." Provides that the taxes imposed by this chapter do not apply to qualified clean-fuel vehicle refueling property. Provides that this section expires September 30, 2004. SECTION 2. Amends Subchapter E, Chapter 152, Tax Code, by adding Section 152.094, as follows: Sec. 152.094. MOTOR VEHICLES PROPELLED BY CLEAN-BURNING FUEL. Defines "clean-burning fuel" and "qualified clean-fuel vehicle property." Provides that the tax imposed by this chapter does not apply to a motor vehicle that is also qualified clean-fuel vehicle property and that is propelled using a clean-burning fuel either exclusively or interchangeably with another motor fuel. Provides that this section applies only to a motor vehicle that was manufactured not earlier than the 1997 model year. Provides that this section expires September 30, 2003. SECTION 3. Amends Subchapter D, Chapter 153, Tax Code, by adding Sections 153.3022 and 153.3035, as follows: Sec. 153.3022. TEMPORARY EXEMPTION. Provides that the tax imposed by this chapter does not apply to the sale or use of liquefied gas to propel a motor vehicle on the public highways of this state if the person registers under Section 153.305 and pays the fee required by that section. Provides that this section applies regardless of whether the person owning the motor vehicle would otherwise pay the tax directly to a dealer or through the purchase of a liquefied gas tax decal permit. Provides that this section expires September 30, 2003. Sec. 153.3035. REGISTRATION FOR TEMPORARY EXEMPTION. Provides that a person who owns a motor vehicle equipped to use liquefied gas must register that motor vehicle with the comptroller in accordance with this section to be eligible for the temporary exemption provided by Section 153.3022. Requires the comptroller to charge a $10 fee for each motor vehicle registered under this section. Sets forth the information which must be included in the registration. Provides that a person who registers under this section is not required to obtain any permit otherwise required by this subchapter or to submit any report otherwise required by this subchapter. Provides that this section expires September 30, 2003. SECTION 4. Amends Subchapter D, Chapter 502, Transportation Code, by adding Section 502.1735, as follows: Sec. 502.1735. OPTIONAL COUNTY FEE FOR ALTERNATIVE FUEL PROJECTS. (a) Defines "alternative fuel." (b) Authorizes the commissioners court of a county to impose by order an additional fee of not more than $2 for registering a vehicle in the county. (c) Authorizes the registration of a vehicle that may be registered under this chapter without payment of a registration fee, in a county imposing a fee under this section, without payment of the additional fee. (d) Provides that a fee imposed under this section may take effect only on January 1 of a year. Provides that the county must adopt the order and notify the Department of Transportation (department) not later than September 1 of the year preceding the year in which the fee takes effect. (e) Authorized the removal of a fee imposed under this section. Authorizes the removal to take effect only on January 1 of a year. Authorizes a county to remove the fee only by rescinding the order imposing the fee and notifying the department not later than September 1 of the year preceding the year in which the removal takes effect. (f) Requires the county assessor-collector imposing a fee under this section to collect the additional fee for a vehicle when other fees imposed under this chapter are collected. (g) Authorizes a county imposing a fee under this section to deduct for administrative costs an amount of not more than five percent of the revenue it receives from the fee. Requires the county making the deductions provided for by this subsection to deposit the remainder of the fee revenue in a separate fund in the county treasury to be administered by the commissioners court. (h) Authorizes a county to use the revenue in the separate fund only to provide competitive grants to support the development of projects, technology, and infrastructure related to the use of alternative motor fuels and alternative fueled vehicles, including the conversion or purchase of alternative fueled vehicles. (i) Requires the commissioners court to adopt rules and develop forms necessary to administer this section not later than the 90th day after the date on which the court adopts an order imposing the fee. SECTION 5. Effective date: September 1, 1999. Makes application of this Act prospective. SECTION 6. Emergency clause.