C.S.H.B. 2926 78(R) BILL ANALYSIS C.S.H.B. 2926 By: Geren State Cultural and Recreational Resources Committee Report (Substituted) BACKGROUND AND PURPOSE Under current law, a person engaged in the business of selling vessels and outboard motors does not necessarily come under the jurisdiction of the Texas Parks & Wildlife Department (TPWD). Vessel and motor sellers may, if they like, acquire certain privileges under a limited registration program administered by the TPWD whereby a dealer's or manufacturer's number is issued. A program number entitles sellers to permit the temporary use a boat for 15 days while a permanent TX number for a sale is being processed. It also permits sellers to show, demonstrate, or test boats in connection with potential buyers and sales. A registered seller who is a dealer also may transfer a certificate of title to a boat without securing a certificate of title in the dealer's name, if sold in the normal course of business. This non-binding and limited registration system has led to serious inaccuracy and confusion as to who the legitimate sellers of vessels and outboard motors are in Texas. Even if registered, the unchecked privileges granted are being abused. The situation has fostered an environment where non-legitimate sellers can easily enter the market and undertake numerous fraudulent activities, including the sale and transfer of boats without collecting or remitting sales or use taxes. Under current law, the TPWD lacks sufficient statutory authority to effectively address the problem. If not corrected, the problem will continue to grow and harm not only the state, but also the boating industry and the businesses of legitimate dealers and manufacturers who are already adversely impacted. Consumers are also harmed by the exposure to sham sellers and the lack of product and service follow-up normally provided by legitimate sellers. CSHB2926 amends the Parks and Wildlife Code to require mandatory licensing of participants in the vessel and outboard motor industry. The bill allows Texas Parks and Wildlife Commission to better monitor the boating industry in an effort to protect Texas consumers and ensure the proper remittance of sales tax proceeds. RULEMAKING AUTHORITY It is the opinion of the committee that rulemaking authority is expressly delegated to the Texas Parks and Wildlife Commission in SECTION 4 (Section 31.032, Parks and Wildlife Code), SECTION 5 (Section 31.039, Parks and Wildlife Code), SECTION 7 (Section 31.0412, Parks and Wildlife Code), SECTION 10 (Section 31.0465, Parks and Wildlife Code), and SECTION 14 of this bill. SECTION BY SECTION ANALYSIS SECTION 1. Amends the Parks and Wildlife Code by clarifying the definition of a "Dealer" by adding a person selling on consignment, a person displaying for sale, and a person selling a motorboat. Amends the Parks and Wildlife Code by adding the definition of a "Distributor" to mean a person who offers for sale, sells, or processes for distribution new boats and outboard motors to dealers in Texas. SECTION 2. Amends the Parks and Wildlife Code by adding the requirement of a dealer to operate in a sufficient space and to display a sign that is conspicuous and shows the name of the dealership. SECTION 3. Amends Section 31.021, Parks and Wildlife Code, to require an identifying number to be displayed on the bow of the vessel as required by this chapter. SECTION 4. Amends the Parks and Wildlife Code to exempt certain vessels registered with the United States Coast Guard from having to attach an identification number to the vessel as required by Section 31.032 (a) of the Parks and Wildlife Code. Requires the Commission to adopt rules for the placement of the validation decal in an alternate location for antique boats; and defines antique boats. SECTION 5. Amends Section 31.039, Parks and Wildlife Code, to authorize the Commission to charge fees for access to certain records made or kept under this chapter. SECTION 6. Amends the Parks and Wildlife Code to require a license for each location from which the person engages in a business as a dealer, distributor, or manufacturer. Adds the term "distributor" and substitutes the word "license" for "number" in various subsections. Amends the Parks and Wildlife Code by requiring the Department to issue a dealer, distributor, or manufacturer number to each license holder. The Parks and Wildlife Commission is authorized to establish the form and manner for display of the license. Amends the Parks and Wildlife Code to authorize a distributor to use a distributor's number for vessels the distributor wishes to show, demonstrate, or test on the water of this state. The bill further defines "show, demonstrate, or test" to not include use of a vessel for recreational purposes or participation in a contest or event. SECTION 7. Amends the Parks and Wildlife Code by adding a new Sec. 31.0411 which sets the license period under this chapter at 2 years from the date of issuance. Adds subsections to restrict transfer of licenses under this chapter except that a license issued under this chapter shall remain valid for the business location specified on the license if a change of ownership and/or business name occurs. And a license may be transferred to a new address if the business moves to another location and no change of ownership occurs. Sec. 31.0412 is added to the Parks and Wildlife Code to authorize the Commission to adopt rules relating to licensing. Sec. 31.0413 is added to the Parks and Wildlife Code to exempt vessels less than 12 feet in length with a manufacturers rating of 5 horsepower or less. This section also exempts outboard motors with a manufacturer's rating of five horsepower or less. SECTION 8. Deletes unnecessary language related to the cancellation and voiding of certificates and numbers. SECTION 9. Amends the Parks and Wildlife Code by adding Sec. 31.044 to authorize the Parks and Wildlife Department to inspect a vessel, outboard motor, or records related to the possession, origination, ownership, or transfer of a vessel or outboard motor at a dealership or distributor's or manufacturer's place of business during normal business hours. SECTION 10. Amends the Parks and Wildlife Code by adding Sec. 31.0465 to address the procedure by which to appeal a certificate of title. Language is added to allow an applicant for a certificate of title to appeal the department's refusal to issue a title by filing a bond with the department. The section outlines specific criteria a bond must meet. Adds new section to describe certain instances in which the department may issue the certificate of title to the person filing the bond. Establishes when a right of action to recover the bond for a breach of condition is in order and it ensures that the aggregate liability may not exceed the amount of the bond. Establishes that a bond filed under this section expires in three years. The department will return an expired bond to the person who filed it unless the department is notified of a pending action to recover on the bond. Upon return of a bond, the department shall issue a certificate of title. Authorizes the Commission to define acceptable situations for a title to be issued after the filing of a bond. SECTION 11. Amends the Parks and Wildlife Code by deleting that a duplicate original certificate shall be sent to the owner in an instance where a lien exists. SECTION 12. Amends the Parks and Wildlife Code by adding Sec 31.053 which establishes that a person who is not licensed as a dealer, distributor, or manufacturer must obtain a certificate of number or certificate of title to a vessel or outboard motor before transferring the number or certificate. SECTION 13. Amends the Parks and Wildlife Code to add that a person who violates a proclamation of the commission commits an offense that is a Class C misdemeanor. SECTION 14. Establishes that the Commission shall adopt any rules necessary to implement the Act by January 1, 2004 SECTION 15.Effective Date. EFFECTIVE DATE September 1, 2003 COMPARISON OF ORIGINAL TO SUBSTITUTE The committee substitute reflects appropriate codification and renumbering by Texas Legislative Council. The committee substitute adds additional language that clarifies Texas Parks and Wildlife administrative procedures to facilitate the boat owner registration and titling process. The clarifications will provide additional cost savings to the agency. The substitute exempts extremely small vessels and outboard motors with a manufacturers rating of 5 horsepower or less. It also allows the agency to make rules regarding the placement of validation decals on certain types of boats.