LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 77th Regular Session
Revision 2
April 5, 2001
TO: Honorable Kip Averitt, Chair, House Committee on
Financial Institutions
FROM: John Keel, Director, Legislative Budget Board
IN RE: HB1809 by Deshotel (Relating to certain transactions
subject to regulation as loans.), As Introduced
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* Estimated Two-year Net Impact to General Revenue Related Funds for *
* HB1809, As Introduced: negative impact of $(14,378,000) 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 $(7,183,000) *
* 2003 (7,195,000) *
* 2004 (7,337,000) *
* 2005 (7,631,000) *
* 2006 (7,936,000) *
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All Funds, Five-Year Impact:
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*Fiscal Probable Probable Probable Probable *
* Year Revenue Revenue Revenue Revenue *
* Gain/(Loss) to Gain/(Loss) to Gain/(Loss) to Gain/(Loss) to *
* General Revenue Cities Transit Counties/SPDs *
* Fund Authorities *
* 0001 *
* 2002 $(7,183,000) $(936,000) $(361,000) $(111,000) *
* 2003 (7,195,000) (1,274,000) (492,000) (151,000) *
* 2004 (7,337,000) (1,325,000) (511,000) (157,000) *
* 2005 (7,631,000) (1,378,000) (532,000) (163,000) *
* 2006 (7,936,000) (1,433,000) (553,000) (170,000) *
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Fiscal Analysis
The bill would amend Chapter 342 of the Finance Code, concerning certain
transactions subject to regulation as loans.
A transaction would be defined as a loan if a cash advance were made in
exchange for a check and there was an agreement to delay deposit of the
check for a period of time. The bill would define the "charge" or amount
received by the lender in excess of the cash advance amount as
"interest."
Certain sales of personal or household personal property - where the
buyer agrees to lease the property back to the seller (sometimes referred
to as a "sale-leaseback") - would be classified as a loan, provided that
certain requirements were met. The amount received by the buyer
exceeding the amount paid for the property by the buyer would be defined
as interest.
Sale-leaseback arrangements for property used for business, commercial,
investment, agricultural, or similar purposes would not be affected by
this bill.
The bill would take effect September 1, 2001.
Methodology
Under current law, pursuant to a sale-leaseback transaction, payments
related to certain lease arrangements known as "operating leases" are
subject to the sales tax. ("Operating leases" are instances where lease
payments are made, but payment does not lead to ownership.) If, at the
end of a lease term, an item were repurchased, that sale would be subject
to the sales tax as well. The bill would redefine such transactions as
loans, thus making such lease payments/repurchases exempt from the sales
tax.
Similar sale-leaseback arrangements involving automobiles currently
generate motor vehicle sales taxes when automobiles are sold, leased, and
subsequently resold to the original owner. Generally speaking, and for
periods of less than six months, there is no tax due on the sale portion
of the sale-leaseback. The subsequent rental payments are subject to
motor vehicle rental tax. A resale, following the cessation of rental
payments, is subject to the motor vehicle sales tax. The bill would, as
above, delineate these activities as a loan. Neither the rental payments
nor the resale would be subject to tax.
Any sales of tangible personal property or of automobiles - outside of a
sale-leaseback transaction - would continue to be taxable in the present
manner.
Local Government Impact
Local units of government would have a corresponding fiscal impact from
sales tax revenues, as indicated in the table above.
Source Agencies: 449 Finance Commission of Texas, 466 Office of
Consumer Credit Commissioner, 304 Comptroller of
Public Accounts
LBB Staff: JK, WP, SM, SD, JO, DE