BILL ANALYSIS

H.B. 4094

By: Oliverson

Ways & Means

Committee Report (Unamended)

BACKGROUND AND PURPOSE

Aircraft can be expensive to purchase and maintain, which makes it difficult for flight schools to afford them. Flight schools may have difficulty accessing financing to purchase aircraft as lenders may view aircraft purchases as unprofitable investments, particularly if the flight school is small. Providing a tax refund may encourage individuals to lease their aircraft to flight schools, which could stimulate economic growth and create jobs in the aviation sector.

When buying an aircraft in Texas, one will pay between 6.25 percent and 8.25 percent sales and use tax on the aircraft's sales price, less the value of any trade-in. In most cases, the total tax paid is based on the rate in effect at the seller's place of business. If the purchase was exempt from tax as an occasional sale, one may still lease the aircraft tax-free to a related party if the related party could have claimed the occasional sale exemption on the aircraft if they were the purchaser.

H.B. 4094 seeks to provide for a tax refund on purchased aircraft that are leased to flight schools when the term of the lease agreement is at least 24 months and the purchaser transfers operational control of at least 50 percent of the aircraft's departures to a lessee. Providing a tax refund for leased aircraft could help support flight schools by incentivizing people to lease aircraft to flight schools, which in turn could help increase access to flight training and potentially lead to there being more pilots in Texas.

CRIMINAL JUSTICE IMPACT

It is the committee's opinion that this bill does not expressly create a criminal offense, increase the punishment for an existing criminal offense or category of offenses, or change the eligibility of a person for community supervision, parole, or mandatory supervision.

RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency, or institution.

ANALYSIS

H.B. 4094 amends the Tax Code to entitle the purchaser of an aircraft to apply for and receive a refund of the sales and use tax imposed and paid on the purchase of the aircraft if the purchaser enters into a written lease agreement for a term of at least 24 months under which the purchaser transfers operational control of at least 50 percent of the aircraft's departures to a lessee that has a sales tax permit and uses the aircraft for the purpose of providing flight instruction that is, as follows:

· recognized by the Federal Aviation Administration (FAA);

· under the direct or general supervision of a flight instructor certified by the FAA; and

· designed to lead to a pilot certificate or rating issued by the FAA or otherwise required by a rule or regulation of the FAA.

The bill requires that the aircraft be used in accordance with the terms of the lease agreement. The bill sets the amount of the refund at a percentage of the tax paid on the purchase of the aircraft equal to the percentage of the aircraft's departures for which operational control is transferred under the lease agreement. The bill's provisions expressly do not affect tax liability accruing before the bill's effective date.

EFFECTIVE DATE

September 1, 2023.