BILL ANALYSIS


                                                        H.B. 2624
                                           By: Craddick (Sponsor)
                                                          Finance
                                                         05-05-95
                                Senate Committee Report (Amended)
BACKGROUND

With the passage of S.B. 878, the 73rd Legislature added two new
sections of the Tax Code that effectively created a new system for
the appraisal and property taxation of motor vehicle inventories
held for sale.

The property tax system created by S.B. 878 affects the property
taxation of motor vehicle inventories in two ways:  appraisal and
tax administration.  Regarding appraisal of a motor vehicle
inventory, current law provides a uniform, sales-based appraisal
formula.  Furthermore, current law does two things concerning to
tax administration in the context of motor vehicle inventories. 
First it provides a mechanism by which the taxpayer attaches a
property tax to each vehicle at the time of sale.  Second, it
requires the taxpayer to accumulate tax money and remit it monthly
to the county tax assessor-collector, who is then responsible for
the payment of the motor vehicle inventory taxes to all local
taxing units when due at year's end.

PURPOSE

As proposed, H.B. 2624 amends the appraisal and taxation for motor
vehicle inventories.

RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not grant any
additional rulemaking authority to a state officer, institution, or
agency.

SECTION BY SECTION ANALYSIS

SECTION 1. Amends Section 23.12(f), Tax Code, to authorize the
owner of an inventory other than a dealer's motor vehicle inventory
as that term is defined in Section 23.121 of this code to elect to
have the inventory appraised at its market value as of September 1
of the year preceding the tax year to which the appraisal applies
by filing an application with the chief appraiser requesting that
the inventory be appraised as of September 1.

SECTION 2. Amends Section 23.121, Tax Code, as follows:

     Sec.  23.121.  New heading:  DEALER'S MOTOR VEHICLE INVENTORY;
     VALUE.  (a)  Defines "chief appraiser," "collector," "dealer,"
     "dealer's motor vehicle inventory," "dealer-financed sale,"
     "declaration," "fleet transaction," "motor vehicle," "owner,"
     "person," "subsequent sale," and "total annual sales." 
     Deletes definitions of "applicable inventory," "excluded
     inventory," "special inventory," and "towable recreational
     vehicle."
     
     (b)  Sets forth the formula for the market value of a
       dealer's motor vehicle inventory on January 1.
       
       (c)  Requires, rather than authorizes, the chief appraiser
       to estimate the market value of the dealer's motor vehicle
       inventory.  Makes conforming changes.
       
       (d)  Provides that personal property held by a dealer is
       appraised as provided by other sections of this code, except
       for dealer's motor vehicle inventory.  Requires the chief
       appraiser to appraise the dealer's motor vehicle inventory
       as provided by Section 23.12 of this code in the case of a
       dealer whose sales from dealer's motor vehicle inventory are
       made predominately to dealers.
       
       (e)  Provides that a dealer is presumed to be an owner of a
       dealer's motor vehicle inventory on January 1, if, in the
       12-month period ending on December 31 of the immediately
       preceding year, the dealer sold a motor vehicle to a person
       other than a dealer.  Provides that the presumption created
       by this subsection is not rebutted by the fact that a dealer
       has no motor vehicles physically on hand for sale from
       dealer's motor vehicle inventory on January 1.
       
       (f)  Requires the comptroller to promulgate a form entitled
       Dealer's Motor Inventory Declaration.  Requires each dealer
       to file a declaration with the chief appraiser and file a
       copy with the collector except as provided by Section
       23.122(1) of this code, not later than February 1 of each
       year, not later than 30 days after commencement of business. 
       Provides that the declaration is sufficient to comply with
       this subsection if it sets forth certain information.
       
       (g)  Authorizes the chief appraiser to examine the books and
       records of the holder of a general distinguishing number
       issued by the Texas Department of Transportation
       (department) under the terms provided by this subsection. 
       Requires a request made under this subsection to be made in
       writing, delivered personally to the custodian of the
       records at the location for which the general distinguishing
       number has been issued to provide a period not less than 15
       days for the person to respond to the request, and to state
       that the person to whom it is addressed has the right to
       seek judicial relief from compliance with the request. 
       Authorizes the chief appraiser to examine certain documents
       and records in a request made under this section.
       
       (h)  Requires the chief appraiser to report to the
       department the sale of fewer than five motor vehicles in the
       prior year.
       
       (i)  Provides that a dealer who fails to file a declaration
       required by this section commits an offense.  Provides that
       an offense under this subsection is a misdemeanor punishable
       by a fine not to exceed $500.  Provides that each day during
       which a dealer fails to comply with the terms of this
       subsection is a separate violation.
       
       (j)  Provides that a dealer who violates Subsection (g) of
       this section commits an offense.  Provides that an offense
       under this subsection is a misdemeanor punishable by a fine
       not to exceed $500.  Provides that each day during which a
       dealer fails to comply with the terms of this subsection is
       a separate violation.
       
       (k)  Requires a dealer who fails to file a declaration
       required by this section to forfeit a penalty in addition to
       other penalties provided by law.  Provides that a tax lien
       attaches to the dealer's business personal property to
       secure payment of the penalty.  Requires the appropriate
       district attorney, criminal district attorney, or county
       attorney to collect the penalty established by this section
       in the name of the chief appraiser or collector.  Provides
       that venue of an action brought under this subsection is in
       the county in which the violation occurred or in the county
       in which the owner maintains his principal place of business
       or residence.  Provides that a penalty forfeited under this
       subsection is $1,000 for each month or part of a month in
       which a declaration is not filed after it is due.
     SECTION 3.     Amends Section 23.122, Tax Code, as follows: 

     Sec.  23.122.  PREPAYMENT OF TAXES BY CERTAIN TAXPAYERS.  (a) 
     Defines "aggregate tax rate," "chief appraiser," "collector,"
     "dealer's motor vehicle inventory," "declaration," "owner,"
     "relevant taxing unit," "sales price," "statement,"
     "subsequent sale," "total annual sales," and "unit property
     tax factor."  Deletes the definitions of "county aggregate tax
     rate" and "special inventory."
     
     (b)  Requires a vehicle included in a fleet transaction, or
       a vehicle that is the subject of a subsequent sale, an owner
       or a person who has agreed by contract to pay the owner's
       current year property taxes levied against the owner's motor
       vehicle inventory to assign a unit property tax to each
       motor vehicle sold from a dealer's motor vehicle inventory. 
       Makes conforming changes.
       
       (c)  Prohibits interest generated by an escrow account from
       being used to reduce or otherwise affect the annual
       appropriation to the collector that would otherwise be made.
       
       (d)  Prohibits the owner from withdrawing funds in an escrow
       account created pursuant to this section.
       
       (e)  Makes conforming changes.
       
       (f)  Authorizes the chief appraiser or collector to examine
       documents held by a dealer as provided by this subsection in
       the same manner, and subject to the same provisions, as are
       set forth in Section 23.121(g) of this code.
       
       (g)  Provides that the requirements of Subsection (f) of
       this section apply to all dealers, without regard to whether
       or not the dealer owes vehicle inventory tax for the current
       year.  Provides that a dealer who owes no vehicle inventory
       tax for the current year because he was not in business on
       January 1 shall file the statement required by this section
       showing the information required by this section for each
       month during which the dealer is in business; and may
       neither assign a unit property tax to a motor vehicle sold
       by the dealer nor remit money with the statement unless
       pursuant to the terms of a contract as provided by
       Subsection (1) of this section.
       
       (h)  Authorizes a collector to establish a procedure,
       voluntary or mandatory, by which the unit property tax of a
       vehicle is paid and deposited into an owner's escrow account
       at the time of processing the transfer of title to the motor
       vehicle.
       
       (i)  Makes conforming changes.
       
       (j)  Redesignates existing Subsection (h) and makes
       conforming changes.
       
       (k)  Requires the collector to distribute to relevant taxing
       units in the manner set forth in this section all funds
       collected pursuant to the authority of this section and held
       in escrow by the collector as provided by this section. 
       Provides that this section does not impose a duty on a
       collector to collect delinquent taxes that the collector is
       not otherwise obligated by law or contract to collect. 
       Makes a conforming change.  Deletes text regarding the
       requirement of the collector's distribution of funds to
       relevant taxing units.  Deletes existing Subsections (j) and
       (k).
       
       (l)  Authorizes a person who acquires the business or assets
       of an owner, by contract, to agree to pay the current year
       vehicle inventory taxes owed by the owner.  Requires the
       owner who owes the current year tax and the person who
       acquires the business or assets of the owner to jointly
       notify the chief appraiser and the collector of the terms of
       the agreement and of the fact that the other person has
       agreed to pay the current year vehicle inventory taxes owned
       by the dealer.  Requires the chief appraiser and the
       collector to adjust their records accordingly.  Provides
       that a person who agrees to pay current year vehicle
       inventory taxes as provided by this subsection is not
       required to file a declaration until the year following the
       acquisition.  Provides that this subsection does not relieve
       the selling owner of the tax liability.  Deletes existing
       subsection.
       
       (m)  Makes conforming changes.  Deletes authorization to use
       a fine to defray the cost of enforcing this section.
       
       (n)  Requires a dealer who fails to file a statement as
       required by this section to forfeit a penalty in addition to
       other penalties provided by law.  Provides that a tax lien
       attaches to the owner's business personal property to secure
       payment of the penalty.  Requires the appropriate district
       attorney, criminal district attorney, or county attorney to
       collect the penalty established by this section in than name
       of the chief appraiser or collector.  Provides that venue of
       an action brought under this subsection is in the county in
       which the owner maintains his principal place of business or
       residence.  Provides that a penalty forfeited under this
       subsection is $500 for each month or part of a month in
       which a statement is not filed after it is due.  
       
       (o)  Provides that unit property taxes paid on or before
       January 31 of the year following the date on which they due
       are not delinquent.  Makes conforming changes.
       
       (p)  Requires fines collected pursuant to the authority of
       this section to be deposited in the county depository to the
       credit of the general fund.  Provides that penalties
       collected pursuant to the authority of this section are the
       sole property of the collector, may be used by no entity
       other than the collector, and may not be used to reduce or
       otherwise affect the annual appropriation to the collector
       that would otherwise be made.
     SECTION 4.     Amends Chapter 23B, Tax Code, by adding Section 23.123,
as follows:

          Sec.  23.123.  DECLARATIONS AND STATEMENTS CONFIDENTIAL.  (a) 
     Defines "collector," "chief appraiser," "dealer,"
     "declaration," "owner," and "statement."
     
     (b)  Provides that a declaration or statement filed with a
       chief appraiser or collector as required by Section 23.121
       or Section 23.122 of this code is confidential and not open
       to public inspection, except as provided by this section. 
       Prohibits a declaration or statement and the information
       contained in either from being disclosed to anyone except an
       employee of the appraisal office who appraises the property
       or to an employee of the county tax assessor-collector
       involved in the maintenance of the owner's escrow account.
       
       (c)  Authorizes information made confidential by this
       section to be disclosed in a judicial or administrative
       proceeding pursuant to a lawful subpoena; to the person who
       filed the declaration or statement or to the person's
       representative authorized by the person in writing to
       receive the information; to the comptroller or an employee
       of the comptroller authorized by the comptroller to receive
       the information; to a collector or chief appraiser; to a
       district attorney, criminal district attorney or county
       attorney involved in the enforcement of a penalty imposed
       pursuant to Section 23.121 or Section 23.122 of this code;
       for statistical purposes if in a form that does not identify
       specific owner; or if and to the extent that the information
       is required for inclusion in a public document or record
       that the appraisal or collection office is required by law
       to prepare or maintain.
       
       (d)  Provides that a person who knowingly permits inspection
       of a declaration statement by a person not authorized to
       inspect the declaration or statement or who discloses
       confidential information contained in the declaration or
       statement to a person not authorized to receive the
       information commits an offense.  Provides that an offense
       under this subsection is a Class B misdemeanor.
     SECTION 5.     Amends Section 152.002(b), Tax Code, to include in the
definition of "total consideration," among others, the motor
vehicle inventory tax.

SECTION 6. Effective date:  January 1, 1996.

SECTION 7. Emergency clause.