Honorable Dennis Bonnen, Chair, House Committee on Ways & Means
FROM:
Ursula Parks, Director, Legislative Budget Board
IN RE:
HB3466 by King, Tracy O. (Relating to the appraisal for ad valorem tax purposes of dealer's heavy equipment inventory and the prepayment of taxes on that inventory.), As Introduced
Passage of the bill would require heavy equipment special inventory to be appraised based on the current statutory definition of market value, rather than based on sales and leases and rentals. The extent to which dealers would value their monthly inventory at less than market value and chief appraisers do not reappraise the item at its market value is not known.
The bill amends Section 23.1241 of the Tax Code, regarding dealer's heavy equipment inventory for property tax appraisal purposes, to replace the current appraisal calculation based on the previous year's actual sales and rentals and leases with the sum of the market value of the special inventory for each month in the previous year divided by 12. Each monthly market value would be determined by the dealer. If the chief appraiser determines that the reported values are inaccurate, the bill authorizes the chief appraiser to reappraise the property at its market value and give notices and opportunity to protest as otherwise provided.
For an item of heavy equipment that was part of the inventory for only a portion of the month, the dealer would multiply the market value in that month by the percentage of the days of that month in which the item was part of the special inventory. If an owner was not a dealer on January 1 of the preceding tax year, the market value of the special inventory in the current tax year is the sum of market value of the inventory on the last day of each month in the preceding tax year divided by the number of months in the preceding tax year in which the person was a dealer.
The bill strikes the provision that excludes persons who render their heavy equipment inventory from the definition of a heavy equipment "dealer." The bill excludes from the definition of "dealer" those persons whose sales are made predominately to other dealers. The bill requires the dealer to file the annual declaration with the appraisal district in which the inventory has taxable situs.
The bill amends Section 23.1242 of the Tax Code, regarding the prepayment of taxes by heavy equipment dealers, to require a dealer to assign a unit property tax to each item of heavy equipment in the inventory on the last day of the preceding month. If a dealer has no heavy equipment in the inventory for a month, the dealer must indicate that fact when filing the regular monthly statement.
The bill repeals Section 23.1243 of the Tax Code, relating to refunds of fleet transactions, and repeals Section 41.47(c-1), relating to protests of these refunds. The bill also repeals various definitions in Section 23.1241(a), relating to subsequent sales, fleet transactions, and sales.
The bill's provisions that require heavy equipment special inventory to be appraised based on the current statutory definition of market value, rather than based on sales and leases and rentals, would increase the market value of these items. However, the bill's provision that allows dealers to determine market value would create a negative fiscal impact to the extent that dealers undervalue their property. The extent to which dealers would value their monthly inventory at less than market value and chief appraisers do not reappraise the item at its market value is not known; therefore, the cost cannot be estimated.
The bill would take effect January 1, 2018.
Local Government Impact
Passage of the bill would require heavy equipment special inventory to be appraised based on the current statutory definition of market value, rather than based on sales and leases and rentals. As a result, the market value of these items would increase. However, the bill's provision that allows dealers to determine market value would create a negative fiscal impact to the extent that dealers undervalue their property. The extent to which dealers would value their monthly inventory at less than market value and chief appraisers do not reappraise the item at its market value is not known.