HBA-JRA C.S.S.B. 1435 76(R)BILL ANALYSIS Office of House Bill AnalysisC.S.S.B. 1435 By: Duncan Ways & Means 5/13/1999 Committee Report (Substituted) BACKGROUND AND PURPOSE The 75th Texas Legislature enacted a new system of heavy equipment property tax appraisal. The problem with the new system is that heavy equipment dealers who lease equipment in a leasepurchase agreement are taxed on this equipment under the old January 1 inventory system, and then taxed again under the new system when the sale is finalized. C.S.S.B. 1435 redefines "dealer's heavy equipment inventory" and "sales price" to include items of heavy equipment that are held for sale subject to a lease purchase agreement, rental option, or lease purchase option. In addition, this bill provides that a sale is considered to occur when ownership of an item of heavy equipment is transferred from the dealer to the purchaser. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 23.1241(a)(2), Tax Code, to redefine "dealer's heavy equipment inventory." SECTION 2. Amends Section 23.1241(a)(7), Tax Code, to redefine "sales price." SECTION 3. Amends Section 23.1241(b), Tax Code, as follows: (b) Provides that a sale is considered to occur when ownership of an item of heavy equipment is transferred from the dealer to the purchaser. Makes conforming changes. SECTION 4. Effective date: September 1, 1999. Makes application of this Act prospective from a tax year that begins on or after January 1, 1999. SECTION 5. Emergency clause. COMPARISON OF ORIGINAL TO SUBSTITUTE The substitute modifies the original in SECTION 1 to delete the proposed redefinition of "heavy equipment." The substitute adds a new SECTION 2 to redefine "sales price." The substitute modifies the original by redesignating SECTION 2 of the original to SECTION 3 and restoring the existing language of Subsection (b), except for the provision that a sale is considered to occur when ownership of an item of heavy equipment is transferred from the dealer to the purchaser, which is added in the substitute as it is in the original. The original would have provided that, for the purposes of the computation of property tax, the market value of a dealer's heavy equipment inventory on January 1 is the total annual sales, less sales to dealers, and subsequent sales, for the 12-month period corresponding to the preceding tax year, divided by 12, or for the 12-month period corresponding to the current tax year, divided by 12, whichever is lesser. The substitute also deletes the proposed amendment to Subsection (f), which would have made a conforming change. The substitute deletes SECTION 3 of the original which would have amended Section 23.1242(h), Tax Code, to require the collector to apply the money in the owner's escrow account to the taxes imposed and to deliver a tax receipt to the owner immediately on receiving the notice required in Section 25.25(n). The substitute deletes SECTION 4 of the original which would have amended Section 25.25, Tax Code, by adding Subsections (n) and (o). Proposed Subsection (n) would have required the chief appraiser, before January 20, to change the appraisal roll to correct the market value of a heavy equipment dealer who has filed heavy equipment inventory tax statements for the 12-month period corresponding to the current tax year and whose market value is determined using the 12-month period corresponding to the current tax year and to notify the collector required to administer the provision of Section 23.1242 and affected units of the corrected accounts. The proposed Subsection (n) would have required the chief appraiser, before the 10th day after the end of each calendar quarter, to submit to the appraisal review board and to the board of directors of the appraisal district a written report of each change made under this subsection and provided that the report must include a description and the name of the owner of each property. Proposed Subsection (o) would have required the chief appraiser to change the appraisal roll to reflect the corrected market value if the chief appraiser has examined the books and records of a heavy equipment dealer whose appraised value is determined using the 12-month period corresponding to the current tax year and has determined that the dealer's market value should be corrected. The substitute redesignates SECTION 5 (effective date) and SECTION 6 (emergency clause) of the original to SECTIONS 4 and 5.