HBA-KDB H.B. 1694 77(R)    BILL ANALYSIS


Office of House Bill AnalysisH.B. 1694
By: Hamric
Ways & Means
3/30/2001
Introduced



BACKGROUND AND PURPOSE 

Under current law, a leased motor vehicle is subject to ad valorem property
taxes.   This taxation may have been intended solely for businesses leasing
fleets of vehicles.  However, many such leases are now used by individuals
who wish to pay a lower price for a new vehicle. The Texas Constitution was
amended last year to exempt leased motor vehicles from ad valorem property
taxes if the vehicles are not used by the lessee for the production of
income.  However, without enabling legislation, the constitutional
amendment has no effect.  House Bill 1694 exempts leased motor vehicles
from ad valorem property taxes if such vehicles are not used by the lessee
for the production of income. 

RULEMAKING AUTHORITY

It is the opinion of the Office of House Bill Analysis that rulemaking
authority is expressly delegated to the comptroller of public accounts in
SECTION 1 (Section 11.252, Tax Code) of this bill. 

ANALYSIS

House Bill 1694 amends the Tax Code to entitle a lessor of a motor vehicle
to an exemption from ad valorem taxation of a leased vehicle if the lessee
does not hold the leased vehicle for the production of income and the
leased vehicle is used only for activities that do not involve the
production of income , other than the income to the lessor under the lease.
The bill requires the comptroller of public accounts (comptroller) by rule
to establish exemption application requirements and appropriate procedures
to determine whether a leased vehicle qualifies for an exemption from
taxation.  The bill requires the chief appraiser to publicize these
provisions and the requirements and procedures established by the
comptroller. The bill requires the comptroller by rule to prescribe a
declaration form (form) to be completed by a lessee for a motor vehicle for
which the lessor is authorized to apply an exemption from taxation.  The
bill sets forth provisions regarding the requirements of the form and the
provision of the form to the lessee.  The bill requires the lessor to
maintain a completed form received from the lessee until the fifth
anniversary of the date the lease expires and to make the form available
for inspection and copying by the chief appraiser of the applicable
appraisal district at all reasonable times.  

If the lessor does not maintain such a form, in each applicable tax year
the lessor must render the leased vehicle for taxation in the applicable
rendition statement or property report filed by the lessor and is
prohibited from filing an application for an exemption from taxation for
the leased vehicle.   Such an exemption application  must be filed not
later than the 30th day after the date the lease is entered into or
December 31 of the year in which the lease is entered into, whichever is
later.  If the chief appraiser approves the application, the exemption for
that year applies only to that portion of the year in which the leased
vehicle qualifies for the exemption.  In that event, the amount of taxes
due on the vehicle is calculated by multiplying the amount of taxes that
would be imposed for the year without the exemption by a fraction, the
numerator of which is the number of days in the year before the date the
vehicle qualifies for the exemption and the denominator of which is 365.   

The bill requires the chief appraiser, if the application is approved after
approval of the appraisal records by the appraisal review board, to notify
the collector for each taxing unit that imposes taxes on the vehicle.  The
bill requires the collector to calculate the amount of tax due on the
vehicle in that year and to refund any amount paid in excess of that
amount.    The bill prohibits a lessor, if in any tax year ad valorem taxes
are imposed on a leased vehicle because of the lessor's failure to comply
with the provisions, from directly or indirectly charging the lessee for
those taxes or any penalty or interest on those taxes.  Such a violation is
a deceptive trade practice.   If in any year such an exemption is canceled
because the lessee holds the leased vehicle for the production of income,
the lessor is authorized to charge the lessee for any taxes subsequently
imposed on the vehicle in that year and for any penalty or interest on
those taxes. 

EFFECTIVE DATE

January 1, 2002.