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.