LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE 75th Regular Session March 20, 1997 TO: Honorable Kenneth Armbrister, Chair IN RE: Senate Bill No. 759 Committee on State Affairs By: Armbrister Senate Austin, Texas FROM: John Keel, Director In response to your request for a Fiscal Note on SB759 ( Relating to the appraisal and ad valorem taxation of heavy equipment.) this office has detemined the following: Biennial Net Impact to General Revenue Funds by SB759-As Introduced The bill would make no appropriation but could provide the legal basis for an appropriation of funds to implement the provisions of the bill. FISCAL ANALYSIS: The bill would amend Chapter 23 of the Tax Code to include heavy equipment dealers when providing for personal property inventory appraisal based on prior year sales. The bill would define as a "dealer" a person who was engaged in the business of selling heavy equipment. "Heavy equipment" would be defined as equipment weighing over 5,000 pounds and intended to be used for construction, industrial, maritime, mining, or forestry uses. The bill would exclude vehicles titled or registered under Chapters 501 and 502 of the Transportation Code. Legislation in 1993 and 1995 exempted motor vehicle and boat dealer inventories from the statutory requirement that the market value for business inventory is the price for which it would sell on January 1 as a unit to a purchaser who would continue the business. The legislation created a new, required method for appraising motor vehicle and boat dealer inventories. The market value of these inventories is determined by dividing the total annual sales from the special inventory for the prior calendar year by 12. This bill would apply the same appraisal methodology to heavy equipment dealer inventories. The bill would take effect January 1, 1998 and apply to a tax year beginning on or after that date. METHODOLOGY: Section 403.302 of the Government Code requires the Comptroller to conduct a property value study to determine the total taxable value for each school district. Total taxable value is an element in the state's school funding formula. Passage of this bill could cause a change in school district taxable values reported to the Commissioner of Education by the Comptroller. A reduction in school district taxable values could increase the state's cost of public education based on current law funding formulas. To the extent that the provisions of this bill reduce taxable heavy equipment inventory valuations from current law, there would be a reduction in local tax levies Source: Agencies: 304 Comptroller of Public Accounts LBB Staff: JK ,JD ,BR