| TO: | Honorable Teel Bivins, Chair, Senate Committee on Finance |
| FROM: | John Keel, Director, Legislative Budget Board |
| IN RE: | HB1444 by Krusee (Relating to the exemption from ad valorem taxation of motor vehicles leased for noncommercial use.), As Engrossed |
| Fiscal Year | Probable Net Positive/(Negative) Impact to General Revenue Related Funds |
|---|---|
| 2004 | $7,683,000 |
| 2005 | $7,924,000 |
| 2006 | ($5,422,000) |
| 2007 | $3,175,000 |
| 2008 | ($8,720,000) |
| Fiscal Year | Probable Revenue Gain from GENERAL REVENUE FUND 1 |
Probable (Cost) from FOUNDATION SCHOOL FUND 193 |
Probable Revenue (Loss) from School Districts |
Probable Revenue (Loss) from Counties |
|---|---|---|---|---|
| 2004 | $7,683,000 | $0 | $0 | $0 |
| 2005 | $7,924,000 | $0 | ($13,645,000) | ($3,367,000) |
| 2006 | $8,223,000 | ($13,645,000) | ($5,232,000) | ($4,444,000) |
| 2007 | $22,071,000 | ($18,896,000) | ($5,541,000) | ($6,030,000) |
| 2008 | $15,718,000 | ($24,438,000) | ($7,097,000) | ($7,781,000) |
| Fiscal Year | Probable Revenue (Loss) from Cities |
|---|---|
| 2004 | $0 |
| 2005 | ($3,721,000) |
| 2006 | ($4,912,000) |
| 2007 | ($6,665,000) |
| 2008 | ($8,600,000) |
This bill would repeal Section 11.252(f) which permits cities that acted before January 1, 2002 to tax otherwise exempt leased motor vehicles used primarily for personal use. The bill would also repeal Section 11.252(g) which sets a December 31, 2003 expiration date on the property tax exemption for personal leased motor vehicles, unless continued in effect by the Legislature.
Under current law, qualified personal leased motor vehicles are exempt from property taxation by independent school districts, cities, counties, and special districts until December 31, 2003. Passage of this bill would require the exemption of personal leased motor vehicles effective for the 2004 tax year, and would exempt these vehicles in all Texas cities.
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 2006.
New passenger car and light truck sales in Texas were approximately $1.6 million in fiscal 2002. Nationally, 24 percent of all new vehicle sales are leases; and, in a survey conducted by the Comptroller's Office, it was determined that approximately 12.27 percent of all leases (47,461 Texas leases) were for personal use. The survey identified 16,078 personal use leases, indicating that the potential for increased leases was 31,383. It was assumed that an equal number of leases, 8,967, would be added each period, with an average lease period of 42 months. It was assumed that, based on the marketing potential from having no more property tax on personal use leases, an additional 10,000 leases could be initiated each year for four years.
In addition, leased autos are "turned over," or disposed of by the lessee, on average about every 42 months, while purchased autos are "turned over" on average about every 53 months. Therefore, a secondary effect would be to generate an increase in motor vehicle sales and use tax collections. This increase would appear immediately after the effective date of the bill (and before the first property tax losses would occur), and it would continue as a reflection of the increased turnover 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.
| Source Agencies: | 304 Comptroller of Public Accounts
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| LBB Staff: | JK, JO, SD, WP, DLBe
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