By Hamric, Hill, Davis of Dallas, H.B. No. 1694 A BILL TO BE ENTITLED 1-1 AN ACT 1-2 relating to the exemption from ad valorem taxation of motor 1-3 vehicles leased for personal use. 1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-5 SECTION 1. Subchapter B, Chapter 11, Tax Code, is amended by 1-6 adding Section 11.252 to read as follows: 1-7 Sec. 11.252. MOTOR VEHICLES LEASED FOR PERSONAL USE. (a) In 1-8 this section: 1-9 (1) "Lease" has the meaning assigned by Section 1-10 152.001. 1-11 (2) "Leased vehicle" means a motor vehicle that is 1-12 subject to a lease. 1-13 (3) "Lessee" means the person to whom a leased vehicle 1-14 is leased. 1-15 (4) "Lessor" means the owner of a leased vehicle. 1-16 (5) "Motor vehicle" means a truck or passenger car 1-17 with a shipping weight of not more than 9,000 pounds. 1-18 (b) A lessor is entitled to an exemption from taxation of a 1-19 leased vehicle if: 1-20 (1) the lessee does not hold the leased vehicle for 1-21 the production of income; and 1-22 (2) the leased vehicle is used only for activities 1-23 that do not involve the production of income, other than the income 1-24 to the lessor under the lease. 1-25 (c) The comptroller by rule shall establish exemption 2-1 application requirements and appropriate procedures to determine 2-2 whether a leased vehicle qualifies for an exemption under this 2-3 section. The chief appraiser shall publicize the provisions of 2-4 this section and the requirements and procedures established by the 2-5 comptroller under this subsection. 2-6 (d) In connection with the requirements and procedures under 2-7 Subsection (c), the comptroller by rule shall prescribe a 2-8 declaration form to be completed by a lessee for a motor vehicle 2-9 for which the lessor may apply for an exemption under this section. 2-10 The form shall require the lessee to provide the lessee's full 2-11 name, permanent address, and driver's license or personal 2-12 identification certificate number and to certify under oath that 2-13 the lessee does not hold the leased vehicle for the production of 2-14 income and that the leased vehicle is used only for activities that 2-15 do not involve the production of income. The comptroller shall 2-16 include on the face of the form: 2-17 (1) instructions as to the time and manner in which 2-18 the form must be completed and returned to the lessor; and 2-19 (2) a notice of the penalties prescribed by Section 2-20 37.10, Penal Code, for making a false statement on the form. 2-21 (e) The lessor shall maintain a completed form received from 2-22 the lessee under Subsection (d) until the fifth anniversary of the 2-23 date the lease expires and shall make the form available for 2-24 inspection and copying by the chief appraiser of the applicable 2-25 appraisal district at all reasonable times. If the lessor does not 2-26 maintain a completed form relating to the leased vehicle as 2-27 required by this subsection, in each applicable tax year the 3-1 lessor: 3-2 (1) must render the leased vehicle for taxation in the 3-3 applicable rendition statement or property report filed by the 3-4 lessor under Chapter 22; and 3-5 (2) may not file an application for an exemption under 3-6 this section for the leased vehicle. 3-7 (f) In connection with each lease of a leased vehicle, the 3-8 lessor, not later than the fifth day after the date the lease is 3-9 entered into, shall provide the lessee with the declaration form 3-10 adopted by the comptroller under Subsection (d). The failure of a 3-11 lessor to provide the lessee with the declaration form as required 3-12 by this subsection is a deceptive trade practice under Section 3-13 17.46, Business & Commerce Code. 3-14 (g) If a lessor holds a completed declaration form for a 3-15 leased vehicle, in each tax year during the term of the lease of 3-16 the leased vehicle the lessor shall apply for an exemption for the 3-17 vehicle under this section in the time and manner required by 3-18 Section 11.43. 3-19 (h) A leased vehicle described on a completed declaration 3-20 form that complies with this section and is filed with an 3-21 application for an exemption under this section is presumed to be 3-22 eligible for the exemption. 3-23 (i) In addition to the requirements of Subsections (c) and 3-24 (d), the comptroller by rule shall prescribe a property report form 3-25 to be completed by the lessor describing the leased motor vehicles 3-26 that the lessor owns. The property report form shall require the 3-27 lessor to list each leased vehicle the lessor owns on January 1, to 4-1 provide the year, make, model, and vehicle identification number of 4-2 each leased vehicle, and to provide the name of the lessee, the 4-3 address at which the vehicle is kept, and an indication of whether 4-4 the lessee has designated the vehicle as not held for the 4-5 production of income and not used for the production of income. 4-6 (j) The lessor shall provide the chief appraiser with the 4-7 completed property report form adopted by the comptroller in the 4-8 manner provided by Subchapter B, Chapter 22. 4-9 (k) Notwithstanding Subsection (g) or any other provision of 4-10 this chapter, a lessor who after January 1 of a tax year enters 4-11 into a lease for a motor vehicle that otherwise qualifies for an 4-12 exemption under this section after being leased and who holds a 4-13 completed declaration form for the vehicle shall apply for and is 4-14 entitled to receive the exemption for the applicable portion of 4-15 that tax year. An exemption application under this subsection must 4-16 be filed not later than the 30th day after the date the lease is 4-17 entered into or December 31 of the year in which the lease is 4-18 entered into, whichever is sooner. If the chief appraiser approves 4-19 the application, the exemption for that year applies only to that 4-20 portion of the year in which the leased vehicle qualifies for the 4-21 exemption. In that event, the amount of taxes due on the vehicle 4-22 is calculated by multiplying the amount of taxes that would be 4-23 imposed for the year without the exemption by a fraction, the 4-24 numerator of which is the number of days in the year before the 4-25 date the vehicle qualifies for the exemption and the denominator of 4-26 which is 365. If the application is approved after approval of the 4-27 appraisal records by the appraisal review board, the chief 5-1 appraiser shall notify the collector for each taxing unit that 5-2 imposes taxes on the vehicle. The collector shall calculate the 5-3 amount of tax due on the vehicle in that year and shall refund any 5-4 amount paid in excess of that amount. 5-5 (l) If in any tax year ad valorem taxes are imposed on a 5-6 leased vehicle because of a lessor's failure to comply with this 5-7 section or another provision of this code, the lessor may not 5-8 directly or indirectly charge the lessee for those taxes or any 5-9 penalty or interest on those taxes. 5-10 (m) If in any tax year an exemption under this section is 5-11 canceled because the lessee holds the leased vehicle for the 5-12 production of income or the leased vehicle is used for activities 5-13 that involve the production of income, the lessor may charge the 5-14 lessee for any taxes subsequently imposed on the vehicle in that 5-15 year and for any penalty or interest on those taxes. 5-16 SECTION 2. This Act takes effect January 1, 2002, and applies 5-17 only to ad valorem taxes imposed on a motor vehicle that is subject 5-18 to a lease entered into on or after that date.