HBA-DMH S.B. 248 77(R) BILL ANALYSIS Office of House Bill AnalysisS.B. 248 By: Carona Ways & Means 5/11/2001 Committee Report (Amended) 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. Senate Bill 248 exempts leased motor vehicles from ad valorem property taxes if such vehicles are not used primarily 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 Senate Bill 248 amends the Tax Code to entitle the owner of a motor vehicle that is subject to a lease to an exemption from taxation of the vehicle if the lessee does not hold the vehicle for the production of income and the vehicle is used primarily for activities that do not involve the production of income. The bill requires the comptroller of public accounts (comptroller) by rule to establish exemption application requirements and appropriate procedures to determine whether a leased motor vehicle qualifies for an exemption from taxation. The bill requires the comptroller by rule to adopt a form to be completed by a lessee of a motor vehicle for which the owner is authorized to apply for 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 owner of a leased motor vehicle to maintain a completed form 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 owner does not maintain such a form, the owner must render the leased motor vehicle for taxation in the applicable rendition statement or property report filed by the owner and is prohibited from filing an application for an exemption from taxation for the leased motor vehicle. The bill authorizes the governing body of a municipality by ordinance adopted before January 1, 2002, to provide for the taxation of a leased motor vehicle otherwise exempted from taxation. If the governing body of a municipality provides for the taxation of a leased motor vehicle, the exemption provided does not apply to that municipality. The leased motor vehicle tax exemption provisions expire December 31, 2003, unless continued in effect by the legislature. EFFECTIVE DATE January 1, 2002, and applies only to ad valorem taxes imposed on a motor vehicle that is subject to a lease entered into on or after January 2, 2001. EXPLANATION OF AMENDMENTS Committee Amendment No. 1 modifies the criteria for determining if a motor vehicle is being used primarily for the production of income by specifying that the motor vehicle is presumed to be used for personal use if 50 percent or more of the miles the motor vehicle is driven in a year are for non-income production purposes. Committee Amendment No. 2 requires the comptroller of public accounts (comptroller) by rule to prescribe a property report form (form) to be completed by the lessor describing the leased motor vehicles which the lessor owns. The form shall require the lessor to list each leased vehicle the lessor owns on January 1; to provide the year, make, model, and vehicle identification number of each leased vehicle; and to provide the name of the lessee, the address at which the vehicle is kept, and an indication of whether the lessee has designated the vehicle as not held for the production and not used for the production of income. The amendment requires the lessor to provide the chief appraiser with the completed form adopted by the comptroller.