The Comptroller of Public Accounts adopts a new §9.419, concerning property tax exemption for motor vehicles leased for personal use, with changes to the proposed text as published in the December 28, 2001, issue of the Texas Register (26 TexReg 10801).

The new rule is adopted to implement Senate Bill 248, 77th Legislature, 2001, effective January 1, 2002.

During the proposed period, the comptroller received several comments and made minor clarification changes to the proposed rule based on some of those comments.

An Austin attorney submitted a comment that two provisions in the proposed rule could be read to conflict each other and requested that the comptroller clarify the matter. Although the proposed rule language permits lessors to submit electronic images of affidavits if a chief appraiser has the capability to accept them, another provision in the proposed rule mandates the use of the model form of the Lessee's Affidavit of Primarily Non Income Producing Vehicle Use (Form 50-285). To eliminate this perceived conflict, the comptroller has clarified in subsection (c)(2)(A) that a form that is in substantial compliance with Model Form 50-285 may be used and deleted the proposed language in subsection (c)(3) that required the mandatory use of Model Form 50-285. The comptroller included specific language in subsection (c)(3) that a signed and notarized lessee's affidavit may be electronically imaged. The same Austin attorney submitted another comment noting a misreference in the rule, but the aforementioned changes eliminated that problem.

Harris County Appraisal District (HCAD) submitted a comment that the comptroller clarify that the rule should not be read to limit the chief appraiser's authority to enter into an agreement for electronic exchange of information required by rule in a format agreed to by the chief appraiser and the property owner. The comptroller made this clarification by adding subsection (c)(6).

Based on staff's recommendation, the comptroller has included a phrase in subsection (e)(1) that clarifies that the chief appraiser and the property owner may reach an agreement to modify the notice and inspection terms noted in this rule. This phrase provides clarification that chief appraisers have some flexibility to modify by agreement the notice and inspection procedures in the rule.

HCAD submitted a comment that the comptroller should include vehicle lease date on the exemption application and rendition form. The comptroller has made the change because it agrees with HCAD's comment that the lease date, and not the purchase date, is relevant for the exemption.

Collin County Appraisal District (Collin CAD) submitted a comment that the comptroller should include the rendition filing deadline information on the Lessor's Rendition or Property Report for Leased Automobiles (50-288). The comptroller has made the change to be consistent with other comptroller adopted rendition forms.

No other changes were made for the reasons noted below:

Collin CAD submitted comments that the comptroller should include a filing deadline on the Lessee's Affidavit of Primarily Non Income Producing Vehicle Use (50-285) and should also insert on that form that the term "person" relative to notification by the lessee of any changes in the use of the leased vehicle includes the term "company." The comptroller made no changes based on these comments because there is no statutory deadline for filing Lessee's Affidavit and because the legal definition of "person" already includes all business entities.

Collin CAD submitted a comment that the comptroller should include a notation on the Lessee's Affidavit of Primarily Non Income Producing Vehicle Use (50-285) and the Lessor's Application for Personal Use Automobile Exemptions (50-286) that the vehicles may be taxable by the city. The comptroller made no changes because most cities will exempt personal leased vehicles, the inclusion of a notation of possible taxation by the city could mistakenly lead lessees to assume the vehicle is not totally exempt in most jurisdictions.

Collin CAD submitted a comment that the comptroller should include on the Lessor's Rendition or Property Report for Leased Automobiles (50-288) a list of units having taxing jurisdictions over the listed vehicles. The comptroller made no changes because such information would be inconsistent with all other comptroller adopted rendition forms.

HCAD submitted a comment requesting that the comptroller include specific language permitting lessor to attach a "tabular" list containing required vehicle related information. The CAD's concern was that a literal reading of the rule would limit a lessor's listing of vehicles in an electronic version to only five vehicles per page since the proposed hard copy rendition form provides space for information on five vehicles. The comptroller made no changes because it is unnecessary. The inclusion by lessor of information on an unlimited number of vehicles is inherent in the rule's provisions for the electronic transfer of required vehicle information to the appraisal district.

HCAD submitted another comment that the rule should permit the lessor to file a combined exemption application and rendition. The comptroller made no changes because exemption applications and property renditions are historically separate documents containing different information and separate filing deadlines. The suggested change might have unintended consequences and could result in potential open records problems for same tax office because information on rendition forms is confidential.

HCAD submitted a comment that the proposed rule requires the chief appraiser to provide two notices (a notice to inspect and a notice of reasonable date and time with identification of affidavit) to lessor not required by the Tax Code and that such notices exceed the scope of the comptroller's authority. The comptroller made no changes based on this comment. Senate Bill 248 and Tax Code, §5.03, expressly authorizes the comptroller to promulgate rules to insure uniformity in the administration of an exemption involving thousands of motor vehicles located in an unknown number of jurisdictions throughout the state. The notice and procedure requirements in the rule are designed to provide a uniform and orderly method for chief appraisers to request and obtain information from vehicle owners to properly administer the exemption. As previously noted in this preamble, the comptroller did insert a phrase to subsection (e)(1) to provide more flexibility to chief appraisers.

HCAD submitted a comment that subsection (e)(2) of the proposed rule unduly limits chief appraisers' authority because it requires that a chief appraiser should first attempt to obtain vehicle related information from the lessor, and to contact lessee only if the lessor does not provide the requested information. HCAD stated that there would be a need to directly contact a lessee to obtain relevant information that are only available to the location of the leased vehicle. The comptroller made no changes because subsection (e)(2) is consistent with a reliable assumption that the owner of property is the appropriate party to provide to governmental officials information concerning that property. The language is necessary to help ensure uniform and orderly administration of the exemption in the least invasive manner.

HCAD submitted a comment that the rule is unduly restrictive because it states that a properly executed lessee's affidavit is prima facie evidence that the motor vehicle is not held for the production of income and is used for non-income producing activities. The comptroller made no changes based on this comment. A notarized affidavit containing a clear and prominent warning of the consequences of providing false statements is adequate basis for a presumption of the truthfulness of the information contained within and a presumption that lessee will notify the lessor of any change in vehicle use requiring removal of the exemption. Nothing in the rule precludes a chief appraiser from rebutting this assumption with reliable evidence.

HCAD submitted a comment that subsection (f)(2) should be deleted because the language that the evidentiary provision in subsection (f) do not apply to proceedings or decisions of the Appraisal Review Board (ARB) would encourage ARBs to follow different standards than the appraisal district staff follows in granting the exemption. The comptroller made no changes. Subsection (f)(2) was included to merely restate that an ARB has broad discretion to consider any relevant evidence, and to emphasize the state's limited authority over local ARB proceedings.

This new section is adopted under Tax Code, §5.03, which requires the comptroller to adopt rules establishing the minimum standards for the administration and operation of an appraisal district, Tax Code, §5.07, which requires the comptroller to prescribe the contents and form for the administration of the property tax system, and Tax Code, §11.43(f), which requires the comptroller to prescribe the contents and form for each kind of property tax exemption.

The new section implements Tax Code, Chapter 11, Subchapter B, §11.252.