Honorable Steve Ogden, Chair, Senate Committee on Finance
FROM:
John S O'Brien, Director, Legislative Budget Board
IN RE:
SB495 by Fraser (Relating to an exemption from the motor vehicle use tax for motor vehicles brought into this state by certain military personnel or retired military personnel.), As Introduced
Estimated Two-year Net Impact to General Revenue Related Funds for SB495, As Introduced: a negative impact of ($16,766,000) through the biennium ending August 31, 2013, if the effective date of the bill is July 1, 2011; or a negative impact of ($15,460,000) through the biennium ending August 31, 2013, if the effective date of the bill is September1,2011.
The bill would make no appropriation but could provide the legal basis for an appropriation of funds to implement the provisions of the bill.
Fiscal Year
Probable Net Positive/(Negative) Impact to General Revenue Related Funds
2011
($979,000)
2012
($7,835,000)
2013
($7,952,000)
2014
($8,071,000)
2015
($8,192,000)
2016
($8,315,000)
Fiscal Year
Probable Net Positive/(Negative) Impact to General Revenue Related Funds
2012
($7,508,000)
2013
($7,952,000)
2014
($8,071,000)
2015
($8,192,000)
2016
($8,315,000)
Fiscal Year
Probable Revenue (Loss) from General Revenue Fund 1
2011
($979,000)
2012
($7,835,000)
2013
($7,952,000)
2014
($8,071,000)
2015
($8,192,000)
2016
($8,315,000)
The above table assumes an effective date of July 1, 2011. The table below assumes an effective date of September 1, 2011.
Fiscal Year
Probable Revenue Gain/(Loss) from General Revenue Fund 1
2012
($7,508,000)
2013
($7,952,000)
2014
($8,071,000)
2015
($8,192,000)
2016
($8,315,000)
Fiscal Analysis
The bill would amend Chapter 152 of the Tax Code, relating to an exemption from the motor vehicle use tax for motor vehicles brought into this state by certain military personnel or retired military personnel.
The bill would exempt a Texas resident who is an active duty member (ADM) of the U.S. Armed Forces, or a person who retired as an ADM, from the 6.25 percent use tax due on the purchase of a motor vehicle in another state for use in Texas. A retired ADM would have to register the motor vehicle before the first anniversary of their date of retirement to qualify for the exemption.
The bill also would exempt a new resident who is an ADM, or a person who retired as an ADM, from the $90 use tax due on a motor vehicle purchased and registered in another state and brought into Texas. A retired ADM would have to register the motor vehicle before the first anniversary of their retirement date to qualify for the exemption.
The bill would take effect July 1, 2011, assuming that it received the requisite two-thirds majority votes in both houses of the Legislature. Otherwise, it would take effect September 1, 2011.
Methodology
According to the Comptroller's Office, there were approximately 131,500 ADMs in Texas in 2009, of which an estimated 20 percent (26,300) would purchase a vehicle annually. ADMs residing in the state would, it is assumed, purchase about one-quarter of the vehicles (6,600) outside Texas. The average vehicle value was estimated at $20,000. There were an estimated 5,600 ADMs that retired in Texas in 2009, of which an estimated 12.5 percent (700) would purchase a vehicle outside Texas, with an average vehicle value of $15,000. These cases would become exempt from tax.
Regarding new residents, ADMs rotate duty stations about every three years. About 44,000 of them rotate into Texas annually, about 80 percent own a vehicle purchased outside Texas, and each vehicle is currently subject to the $90 new resident use tax. The number of ADM retirees eligible as new residents was assumed to be about 5,600 of which an estimated 12.5 percent, or 700, would bring a new or used vehicle purchased in another state into Texas, currently subject to the $90 use tax annually. Purchases such as these would become exempt from tax.
Adjustments include a first year collection lag for both effective dates, and a growth rate of 1.5 percent annually.
Local Government Impact
Counties would see revenue losses due to reduced commissions on vehicle transactions.