BILL ANALYSIS

Senate Research Center	H.B. 3651
88R7191 CJD-F	By: Bailes (Nichols)
	Finance
	5/5/2023
	Engrossed

AUTHOR'S / SPONSOR'S STATEMENT OF INTENT

The Comptroller of Public Accounts of the State of Texas' Criminal Investigation Division (CID) is responsible for enforcing state tax laws, including ensuring tax is paid on motor fuels transactions. CID also investigates potential tax fraud. Current law lacks clarity and specific definitions to ensure the successful prosecution of individuals who unlawfully or fraudulently acquire motor fuels.

Creative schemes to fraudulently acquire motor fuels fall outside existing definitions and evolve faster than state law. Because the strict definitions in current law fail to capture new and evolving schemes, prosecutors have declined to prosecute these cases based on the low likelihood of securing a conviction. Although motor fuels theft schemes often involve stolen credit card data, state law also lacks provisions tying motor fuels tax crimes to unauthorized use of credit cards or money.

H.B. 3651 amends the Tax Code to revise certain definitions and add provisions relating to motor fuels tax regulations to strengthen tax collection and prosecution of motor fuels tax related crimes.

H.B. 3651 clarifies terms and definitions in statute to reflect evolving schemes that evade current legal definitions. Specifically, H.B. 3651 makes the following changes:

• removes the term "mounted" from the definition of "cargo tank" to ensure that transferring fuel into any cargo tank qualifies as a taxable transaction, regardless of whether the tank is affixed to a vehicle used to transfer the fuel;
• defines "container" to include any receptacle used to store motor fuel;
• defines "delivery" to ensure that any transfer of fuel constitutes a delivery;
• modifies the definition of "motor fuel" to include any motor fuel capable of use for a motor vehicle licensed on a public highway to expand the types of motor-fuel-powered vehicles beyond those using gasoline or diesel, such as compressed or liquified natural gas;
• classifies individuals who illegally acquire and transport motor fuel as "motor fuels transporters" and subjects them to violations for failure to obtain the appropriate license;
• broadens the definition of "transport vehicles" to include any vehicle used to carry motor fuel, including a motor vehicle, such as modified cars, vans, box trucks, or pickup trucks that fall outside the current definition of transport vehicle; and
• adds the act of "receiving" motor fuel to ensure taxes are due on each subsequent sale of motor fuels, even if the individual is only receiving the fuel with the intent to sell or resell for profit.

H.B. 3651 also adds a new provision to assist motor fuels tax prosecutions:

• ties the use of counterfeit credit card numbers to unlawfully purchase bulk loads of motor fuel for resale to motor fuels regulations and subjects them to these penalties.

H.B. 3651 amends current law relating to motor fuel taxes.

RULEMAKING AUTHORITY

This bill does not expressly grant any additional rulemaking authority to a state officer, institution, or agency.

SECTION BY SECTION ANALYSIS

SECTION 1. Amends Section 162.001, Tax Code, by amending Subdivisions (1), (14), (42), (43), (56), and (61) and adding Subdivisions (16-a) and (17-a) to redefine "agricultural purpose," "cargo tank," "motor fuel," "motor fuel transporter," "solid waste refuse vehicle," and "transport vehicle" and define "container" and "delivery." Makes nonsubstantive changes.

SECTION 2. Amends Section 162.101, Tax Code, by amending Subsection (g) and adding Subsection (h), as follows:

(g) Requires that the amount of the tax, in each subsequent sale of gasoline on which the tax has been paid, be added to the selling price so that the tax is paid by each person receiving the gasoline until it is paid ultimately by the person using or consuming the gasoline.

(h) Creates this subsection from existing text.

SECTION 3. Amends Section 162.103(a), Tax Code, as follows:

(a) Provides that a backup tax is imposed at the rate prescribed by Section 162.102 (Tax Rate) on certain persons, including a person, other than a person exempted under Section 162.204 (Exemptions), who acquires gasoline on which tax has not been paid in an original or subsequent sale or from any source in this state; and a person who acquires gasoline by any unlawful means, including by purchase through the unauthorized use of a credit card, a debit card, or other money, regardless of whether tax was previously paid on the gasoline or was added to the selling price of the gasoline. Makes nonsubstantive changes.

SECTION 4. Amends Section 162.201, Tax Code, by amending Subsection (g) and adding Subsection (h), as follows:

(g) Requires that the amount of the tax, in each subsequent sale of diesel fuel on which the tax has been paid, be added to the selling price so that the tax is paid by each person receiving the diesel fuel until it is paid ultimately by the person using or consuming the diesel fuel.

(h) Creates this subsection from existing text.

SECTION 5. Amends Section 162.203(a), Tax Code, as follows:

(a) Provides that a backup tax is imposed at the rate prescribed by a Section 162.102 on certain persons, including a person, other than a person exempted under Section 162.204, who acquires diesel fuel on which tax has not been paid in an original or subsequent sale or from any source in this state; and a person who acquires diesel fuel by any unlawful means, including by purchase through the unauthorized use of a credit card, a debit card, or other money, regardless of whether tax was previously paid on the diesel fuel or was added to the selling price of the diesel fuel. Makes nonsubstantive changes.

SECTION 6. Makes application of this Act prospective.

SECTION 7. Effective date: September 1, 2023.�