LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 77th Regular Session
April 19, 2001
TO: Honorable Rene Oliveira, Chair, House Committee on Ways &
Means
FROM: John Keel, Director, Legislative Budget Board
IN RE: HB1694 by Hamric (Relating to the exemption from ad
valorem taxation of motor vehicles leased for personal
use.), Committee Report 1st House, as amended
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* Estimated Two-year Net Impact to General Revenue Related Funds for *
* HB1694, Committee Report 1st House, as amended: positive impact *
* of $6,774,000 through the biennium ending August 31, 2003. *
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General Revenue-Related Funds, Five-Year Impact:
****************************************************
* Fiscal Year Probable Net Positive/(Negative) *
* Impact to General Revenue Related *
* Funds *
* 2002 $0 *
* 2003 6,774,000 *
* 2004 7,095,000 *
* 2005 (10,816,000) *
* 2006 (14,421,000) *
****************************************************
All Funds, Five-Year Impact:
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*Fiscal Probable Probable Probable Probable *
* Year Revenue Revenue Revenue Revenue *
* NetGain/(Loss) Gain/(Loss) to Gain/(Loss) to Gain/(Loss) to *
* to General School Districts Cities Counties *
* Revenue Fund *
* 0001 *
* 2002 $0 $0 $0 $0 *
* 2003 6,774,000 0 0 0 *
* 2004 7,095,000 (18,238,000) (4,974,000) (4,500,000) *
* 2005 (10,816,000) (16,242,000) (9,404,000) (8,508,000) *
* 2006 (14,421,000) (13,703,000) (13,141,000) (11,889,000) *
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Fiscal Analysis
The bill would amend the Tax Code to exempt from ad valorem taxation
motor vehicles leased for personal use only.
The bill would entitle a lessor to an exemption from ad valorem taxation
of a leased vehicle if a lessee did not hold a leased vehicle for the
production of income, and the leased vehicle was used only for activities
that did not involve the production of income.
The bill would take effect January 1, 2002; it would apply only to ad
valorem taxes imposed on a motor vehicle subject to a lease entered into
on or after that date.
Methodology
Data on leased motor vehicles were obtained through a Comptroller's
Office survey of county appraisal districts. It was estimated that
approximately 220,000 vehicles would meet the "personal use only"
criterion, with an average value of approximately $15,000. Under current
law, leased motor vehicles are rendered for property taxation to
independent school districts, cities, counties, and special districts.
This bill would reduce revenues to these taxing districts. Under the
school finance formula, the state would reimburse school districts for
their losses after a one-year lag, beginning in fiscal 2005.
The Texas percentage of personal use only lease vehicles to new motor
vehicles sold is approximately 17 percent. The estimated fiscal impact
assumes that leased auto "turnover," or disposed of by a lessee, occurs
on average every 42 months, whereas purchased auto "turnover" occurs on
average every 53 months. This effect, combined with the assumption that
lease cars typically cost 5 percent to 8 percent more than purchased cars
would generate an increase in motor vehicle sales and use tax
collections. This increase would begin to appear with the effective date
of the bill (and before the first property tax losses would occur), and
it would continue as a reflection of the turn-over in the Texas motor
vehicle fleet.
The first losses to units of local government reflect a one-year lag, and
a two-year lag in state reimbursement to independent school districts,
given the mechanics of property taxation and school finance provisions.
Note: The fiscal impact of any proportional property tax due on a leased
vehicle for a period not covered by an exemption was not considered
significant; as such, no estimate was included for this effect.
Local Government Impact
The tax revenue losses to local units of government are reflected in the
above tables.
Source Agencies: 304 Comptroller of Public Accounts
LBB Staff: JK, SD, BR