The Texas Department of Motor Vehicles (department) proposes amendments to Subchapter A, §217.3, Motor Vehicle Titles, and Subchapter B, §217.22, Motor Vehicle Registration, both relating to Vehicle Titles and Registration. The previously published proposed amendments in the May 18, 2012, issue of the Texas Register (37 TexReg 3708) are withdrawn and simultaneously republished with additional amendments for consideration and public comment.

EXPLANATION OF PROPOSED AMENDMENTS

The proposed amendments are necessary to comply with the requirements of House Bill 2357, 82nd Legislature, Regular Session, 2011, which reorganized Transportation Code, Chapters 501, 502, 504, and 520, the motor vehicle statutes, including updating them to reflect automation capability in systems and payment. Many contain amendments that update citation changes made due to the reorganization. Throughout the rules "certificate of title" has been replaced with "title" in accordance with HB 2357 simplification.

In addition, HB 1674, 82nd Legislature, Regular Session, 2011, allows registration renewal to be denied if a child support agency gives the department notice that the obligor failed to pay child support. This changed from the requirement that the department had to be given a final order. The amendments are also necessary to comply with the requirements of House Bill 2017, 82nd Legislature, Regular Session, 2011, which authorizes the department to require identification for titling and initial registration services.

Section 217.3(a)(1) is modified to delete the reference to a motorcycle, motor-driven cycle, or moped designed for or used exclusively on golf courses because these vehicle were removed from the definition of §501.002(17)(E) by HB 2357. Subsection (a)(1)(D) requiring motors installed on bicycles to be certified by the Department of Public Safety (DPS) was removed because DPS does not certify them as a moped.

The definition of "neighborhood electric vehicle" is removed from subsection (a)(3) because it is defined in Transportation Code, §551.301. New paragraph (6) states the department will not title a vehicle that does not have a body, motor, and frame manufactured by a motor vehicle manufacturer, with the exception of a trailer as defined in Transportation Code, §501.002. This is to clarify that only motor vehicles with manufactured major component parts will be titled in order to protect public safety.

Subsection (b)(1)(C) is added to comply with §501.145(c) allowing a member of the military serving on active duty to be able to apply for title no later than the 60th day after assignment of ownership.

Section 217.3(c)(1)(A) allows the department, rather than the division director, to prescribe the manufacturer's certificate of origin form in order to delegate this duty.

New §217.3(c)(6) provides that an application for title is not acceptable unless the applicant presents a current photo identification of the owner containing a unique identification number and expiration date. The identification document must be a driver's license or state identification certificate issued by a state or territory of the United States, United States or foreign passport, United States military identification card, North Atlantic Treaty Organization identification or identification issued under a Status of Forces Agreement, or United States Department of Homeland Security, United States Citizenship and Immigration Services, or United States Department of State identification document. These identification documents are the same as those for existing identification necessary for a certified copy of a title, except that all owners must present identification to obtain a certified copy, but only one owner need submit identification to obtain the original title. A certified copy of a title is a duplicate title. By obtaining identification for all owners on the application for a certified copy, then all owners understand that there is a possibility that two titles exist. Within this subsection, "current" is defined as not to exceed 12 months of the expiration date. A person who holds a general distinguishing number issued under Chapter 503 of the Transportation Code or Chapter 2301, Occupations Code, is not required to submit the owner's identification but must retain a copy of the owner's current photo identification in the purchase and sales records as required under §215.144. These files are auditable.

Section 217.3(e)(2) deletes the requirement that certain requests for certified copies must be made by mail.

Section 217.3(g) is amended to update citations and provide for a $15 administrative fee and appraisal process in accordance with HB 2357. For vehicles that are 25 years or older, the department will not accept an appraisal that is less than $4000. An out-of-state vehicle may have its vehicle identification number verified by a law enforcement officer, or a department Regional Service Center in addition to a Texas license inspection station in order to broaden the way to obtain that documentation. The form will be prescribed by the department. The remainder of subsection (g) is deleted as it repeats the statutory language of Transportation Code, §501.051. Under HB 2357, the expired bonds no longer need to be returned to the title owner as expired bonds do not have value.

In accordance with HB 2357, a new procedure is provided in subsection (h) that can be utilized when all parties agree to rescind a new vehicle sales transaction. Currently, even if all parties agree to rescind the sale, a court order must be sought. The department may rescind, cancel, or revoke an application for a title if a signed, notarized affidavit is presented within 21 days of initial sale containing: a statement that the vehicle involved was a new motor vehicle in the process of a first sale; a statement that the dealer, the applicant, and any lienholder have canceled the sale; a statement as to whether the vehicle was in possession of the title applicant; and an odometer disclosure statement if appropriate. The 21 day time period was chosen as adequate time to prepare and submit the affidavits. Furthermore, the time frame accommodates denial of rescission if the vehicle has had an owner for a significant length of time.

Following this procedure does not negate the fact that the vehicle has been subject to a previous retail sale. If the vehicle was in the possession of the title applicant, then the dealer shall disclose to the subsequent purchaser that the vehicle was subject to a prior retail sale and the effect, if any, the prior retail sale has on the warranty coverage of the vehicle. A copy of the written disclosure shall be provided to the subsequent purchaser and the dealer shall maintain a copy in the sales file of the motor vehicle.

Amendments to §217.22(b)(4)(C)(ii) allow a registration receipt that is not more than six months past the date of expiration to be used as accompanying documentation to support a registration application. This broadens the types of verifiable documentation that can be used.

Amendments to §217.22(b)(5) require the same identification as §217.3(c)(6), regarding application for titles, to apply for initial registration.

The amendments to subsection (c) require that a motor vehicle must display two license plates, one at the exterior front and one at the exterior rear of the vehicle that are securely fastened at the exterior front and rear of the vehicle in a horizontal position of not less than 12 inches from the ground, measuring from the bottom, except that a vehicle described by Transportation Code, §621.2061 may have its rear plate placed so that it is clearly visible. However, if the vehicle is a road tractor, motorcycle, trailer or semitrailer, the vehicle must display one plate that is securely fastened at, or as closely practical to, the exterior rear of the vehicle in a position not less than 12 inches from the ground, measuring from the bottom. Subsection (d)(6) is amended to comply with HB 1674 which allows a child support agency to give the department notice of a child support delinquency in order for a denial flag to be placed on the registration renewal. Previously, a final order was required. Transportation Code, §502.045, requires the department to adopt a list of evidentiary items sufficient to establish good reason for delinquent registration. The amendments to subsection (d) establish that valid reasons may include extensive repairs, being out of the country, using the vehicle only for seasonal use, military service, and storage of the vehicle, a medical condition such as an extended hospital stay; and any other reason submitted with evidence that the tax assessor collector determines is valid. Evidence of a valid reason may include receipts, passport dates, and military orders.

FISCAL NOTE

Linda Flores, Chief Financial Officer, has determined that for each of the first five years the amendments as proposed are in effect, there will be fiscal implications for state or local governments as a result of enforcing or administering the amendments.

Currently, the department is not reimbursed for costs associated with applications for bonded titles. The new $15 fee is calculated to be revenue neutral. The department processed approximately 38,000 bonded titles in Fiscal Year 2011 and the projection for bonded titles is approximately 47,000 for Fiscal Year 2012. The approximate time to process a bonded title is approximately 35 minutes. The proposed fee will cover the costs of the transaction. Since the department was absorbing this cost, it will not expend approximately $235,000 the remainder of the fiscal year.

The amendments regarding identification documents will have an overall positive fiscal impact on the state.

The e-title system reaches a breakeven point in 2016 and creates a net positive impact to the state and public of $41 million by 2017. The positive net cumulative effect will be $274 million by 2017 when the reduction in the number of unlicensed driver accidents is considered. The $274 million does not take into consideration the decrease in fraud related to titling of vehicles as this could not be quantified due to lack of data.

Randy Elliston, Director, Vehicle Titles and Registration Division, has certified that there will be no significant impact on local economies or overall employment as a result of enforcing or administering the amendments.

PUBLIC BENEFIT AND COST

Mr. Elliston has also determined that for each year of the first five years the amendments are in effect, the public benefit anticipated as a result of enforcing or administering the amendments is to streamline procedures for titling and registration of motor vehicles. An additional benefit will be to clarify the department's use of identification as a tool to prevent fraud in obtaining titles, registration and records.

There is an anticipated economic costs for persons required to comply with the $15 administrative fee for a bonded title application.

Texas Government Code, §2006.002, requires a state agency considering adoption of a rule that would have an adverse economic effect on small businesses or micro-businesses to project the economic impact of the rule, and describe alternative methods of achieving the purpose of the proposed rule. Before adopting a rule that would have an adverse economic effect on small businesses or micro-businesses, a state agency must prepare a statement of the effect of the rule on small businesses and micro-businesses, which must include an analysis of the cost of compliance with the rule for small businesses and micro-businesses and a comparison of that cost with the cost of compliance for the largest businesses. For each year of first five years the section is in effect, there will be some fiscal implications to business that qualify as small or micro-businesses, or persons as a result of enforcing or administering the section as proposed, including large businesses. A small business is a business that has fewer than 100 employees or less than $6 million in annual gross receipts. A micro-business has fewer than 20 employees.

The department does not maintain data of a nature that would allow the categorization of a particular licensee under Government Code, Chapter 2006. The Comptroller's website contains information that would estimate that 82% of the 14,752 businesses or individuals issued general distinguishing numbers would be categorized as small businesses. The overwhelming majority of licensees would have 20 or fewer employees and would be categorized as "micro-businesses." Since all used automotive businesses will be affected regardless of size, for the purposes of this impact statement and flexibility analysis, the distinction between "small business" and "micro-business" under Government Code, Chapter 2006 would not matter. The total impact to the industry will be considered.

The impacts to the used automotive industry is a negative impact of approximately $90 million per year which represents a loss of approximately 1% of profits to the $46 billion a year industry. This is not a conservative estimate as it was made using the highest population sample to calculate impacts and assuming that every undocumented individual over the age of 16 is a vehicle owner and that 20% of that segment of the population replaces their motor vehicle every year.

An alternative to the identification amendments would be to accept other photo identification such as library cards, employee identification cards, or other identification issued by government entities. Other forms of identification were not selected because they are not maintained in verifiable databases available to department employees or law enforcement officials, do not contain security features that are difficult to duplicate, do not contain an expiration date, or are not secure because they are issued upon the presentation of documents that are not secure.

Another alternative would be to not require identification. This alternative was not selected because identification is essential to electronic titles (e-titles) and e-titles are central to the effort to modernize the agency processes. E-titles will eliminate the need for paper titles and create electronic records of vehicle ownership. United States photo identification was the basis for approval received from the National Highway Traffic Safety Administration (NHTSA) to accept electronic signatures in lieu of original signatures for federally required odometer statements. Without the ability to capture an electronic signature, the department cannot process a paperless title transfer.

Requiring identification not only enables the e-title system, but it protects the integrity of the title and motor vehicle ownership data; deters fraudulent motor vehicle sales, transfers and loans; validates correct vehicle ownership, helps resolve ownership disputes, and clarifies "same name" issues.

Foreign nationals who return with the motor vehicle to their home country are not considered in the impact calculations because no identification is necessary if the motor vehicles are not titled and registered in Texas.

The 2010 census is designed to count "every resident." It counted 25.1 million people residing in Texas, including undocumented individuals. The United States Department of Homeland Security (DHS) which used data from the American Community Survey conducted by the Census Bureau established that there were 1.79 million undocumented individuals residing in Texas. In 2010, the undocumented population consisted of approximately 7.1% of the population of Texas. Using a three year average of 1.10% growth for the years 2008-2010, the undocumented individual population is estimated at 1.83% for 2013, 1.85% for 2014, 1.87% for 2015, 1.89% for 2016, and 1.91% for 2017. DHS counts an unauthorized individual as someone with an "expired" status. However, the rules define "current" as not to exceed 12 months of expiration, so the actual percentages will be lower.

A person cannot legally drive until that person reaches the age of 16. The Census Bureau reports that in 2010 there were 19 million people over the age of 16 in Texas which was 75.7% of the population. Using that percentage, the anticipated population would be 77.2% for 2013, 77.3% for 2014, 77.4% for 2015, 77.5% for 2016, and 77.7% for 2017. The percentage of undocumented individuals in that age group is 5.20% for 2013, 5.14% for 2014, 5.08% for 2015, 5.02% for 2016, and 5.10% for 2017.

The negative impact was based on the assumption that the identification could negatively affect sales due to a reduced demand from that population group. The calculation takes into consideration all vehicle sales, private party or retail. In 2011, 5 million titles were issued for new and used (3.5 million) vehicles. This number does not include salvage titles or certified copies of titles which are not associated with a sale. Estimates of titles were made using the 2011 figure with the 10 year average growth rate of 1.07% per year. The estimate is 5,176,189 (3,675,094 used) for 2013, 5,231,574 (3,714,417 used) for 2014, 5,287,552 (3,754,162 used) for 2015, 5,344,128 (3,794,331 used) for 2016, and 5,401,311 (3,834,931 used) for 2017.

The Comptroller of Public Accounts reported motor vehicle sales tax collection of $2.72 billion for fiscal year 2011 which calculates to $43.5 billion of vehicle sales transactions. The sales tax revenue is 61% from new vehicles and 39% from used vehicles compared to the titles issued: 29% for new vehicles and 71% for used vehicles. It is assumed that for new vehicles, the purchaser would have the identification required by the major financial institutions.

The possible profit margin range for a used vehicle retailer is 10% - 20%. Using the higher 20%, on an average retail price of $8399, the profit is $930. The impact would be $91,206,749 on used vehicle sales, $16,286,920 on sales tax revenue, $1,791,746 on title revenue, $2,755,489 on registration revenue, and $542,953 on county road and bridge fees for 2013. The impact would be $91,206,749 on used vehicle sales, $16,286,920 on sales tax revenue, $1,791,746 on title revenue, $2,755,489 on registration revenue, and $542,953 on county road and bridge fees for 2013. The impact would be $92,858,468 on used vehicle sales, $16,581,869 on sales tax revenue, $1,796,991 on title revenue, $2,763,555 on registration revenue, and $544,543 on county road and bridge fees for 2014. The impact would be $94,561,159 on used vehicle sales, $16,885,921 on sales tax revenue, $1,802,653 on title revenue, $2,772,262 on registration revenue, and $546,259 on county road and bridge fees for 2015. The impact would be $96,321,831 on used vehicle sales, $17,200,327 on sales tax revenue, $1,808,835 on title revenue, $2,781,769 on registration revenue, and $548,132 on county road and bridge fees for 2016. The impact would be $98,234,651 on used vehicle sales, $17,541,902 on sales tax revenue, $1,817,247 on title revenue, $2,794,705 on registration revenue, and $550,681 on county road and bridge fees for 2017.

The department estimates that by 2017, 80% of the titles issued will be e-titles. This will create savings to the state from: reduced outsourced labor of printing, postage, preparation and supply costs; improved workflow and business processes; and reduced error rates. The savings and benefit to the public and industry are reduced transaction costs, service delivery cycle time, and paper reporting requirements.