Leased Cars for Personal UseNew Tax Exemption Requires Comptroller Rule, Forms
Effective January 1, 2002, some leased vehicles may be exempt from property taxes for 2002 taxes forward. The new state law, however, requires certain forms to be filed and the Comptroller to adopt a rule for administering this new property tax exemption.
Senate Bill (S. B.) 248 added Property Tax Code Section 11.252 to exempt motor vehicles leased for personal use. These vehicles must be passenger cars or trucks with a shipping weight of not more than 9,000 pounds. The law defines “personal use” as using the vehicle more than 50 percent of its use (based on mileage) for activities that do not involve the production of income.
The new law requires a Comptroller rule to establish exemption application requirements and procedures to determine whether a vehicle qualifies. The lessee must complete a Comptroller adopted form certifying under oath that the vehicle is not primarily used for the production of income. The owner (lessor) will maintain the lessee executed forms for inspection and copying by the local county appraisal district (CAD).
S. B. 248 also requires the owner of leased vehicles to render non-exempt vehicles for taxation and provide the CAD’s chief appraiser with an additional list of all leased vehicles.
Two important points to the new exemption is that the exemption applies only to vehicles subject to a lease entered into on or after January 2, 2001. Thus, the exemption is for new personal car leases that would have paid taxes for tax year 2002 forward.
The second point is that a city, by ordinance adopted before January 1, 2002, may tax personal leased vehicles. So, cities may continue to tax all leased vehicles, both business and personal.
One last item to note is that Section 11.252 expires December 31, 2003. Thus, if the Texas Legislature does not continue this section when it meets in 2003, the exemption will expire after the 2003 taxes.
Comptroller Rule 9.419
The Comptroller proposed new Rule Section 9.419, published December 28 in the Texas Register, to implement S. B. 248. The Comptroller’s Property Tax Division mailed the proposed rule and forms to CADs and others for comments. After the 30-day comment period, the Comptroller will adopt the final rule as amended.
The proposed rule is as follows.
Rule Section 9.419.
Procedures for Determining Property Tax Exemption for Motor Vehicles Leased for Personal Use.
- Effective Date. This section is effective for motor vehicles that are leased on or after January 2, 2001.
- Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise.
- Lease—An agreement whereby an owner of a motor vehicle for consideration gives exclusive use of a motor vehicle to another for a period that is longer than 180 days.
- Lessee—A person who enters into a lease for a specific motor vehicle primarily for the personal use of the lessee or the lessee’s family.
- Lessor—A person who owns a motor vehicle that is leased to another person.
- Lessee’s Affidavit—A sworn statement that a lessee executes to attest that the lessee does not hold the leased motor vehicle for the production of income and does not primarily use the leased motor vehicle for the production of income.
- Motor vehicle—A passenger car or truck with a shipping weight of 9,000 pounds or less.
- Reasonable date and/or time—A work weekday, Monday through Friday, and a time that is after 8:00 a.m. and before 5:00 p.m., unless the appraisal district and the lessor agree otherwise.
- The Comptroller will make available model forms that are adopted by reference in paragraph (1) of this subsection. Copies of the form are available for inspection at the office of the Texas Register or may be obtained from the Comptroller of Public Accounts, P.O. Box 13528, Austin, Texas 78711. Copies may also be requested by calling our toll-free number, 1-800-252-9121. In Austin, call (512) 305-9999. From a Telecommunications Device for the Deaf (TDD), call 1-800-248-4099, toll free. In Austin, the local TDD number is (512) 463-4621.
- The comptroller adopts by reference the following model forms:
- Lessee’s Affidavit of Primarily Non Income Producing Vehicle Use (Form 50-285);
- Lessor’s Application for Personal Use Lease Automobile Exemptions (Form 50-286); and
- Lessor’s Rendition or Property Report for Leased Automobiles (Form 50-288).
- A chief appraiser or lessor must use the comptroller model forms that are adopted by reference in paragraph (1) of this subsection, unless the non-model form:
- for Lessor’s Application for Personal Use Lease Automobile Exemptions, and Lessor’s Rendition or Property Report for Leased Automobiles substantially complies with Form 50-286 and Form 50-288 by using the same language in the same sequence as the model form;
- is an electronic version of a comptroller model form and preserves the same language in the same sequence as the comptroller model form; or
- has been approved by the comptroller in writing before the form is used.
- Notwithstanding paragraph (2)(A) of this subsection, the comptroller Lessee’s Affidavit of Primarily Non Income Producing Vehicle Use (Form 50-285) must be used, and no other form may be used regardless of whether it substantially complies with Form 50-285.
- Subject to the limitations that are provided in paragraph (2) of this subsection, if a chief appraiser uses a form other than the one that the comptroller has adopted, then the chief appraiser must make the form available to the lessor. A chief appraiser may not mandate the use of his form in lieu of the comptroller model form and may not deny a lessor’s claim for exemption based solely on the lessor’s failure to use the chief appraiser’s form.
- A Lessee’s Affidavit of Personal Use of Leased Vehicle, which the comptroller prescribed on September 10, 2001, is the acceptable exemption form until the effective date of the comptroller model forms that are adopted by reference in paragraph (1) of this subsection.
- A lessor satisfies the requirements of Tax Code, Section 11.252, for exemption of leased motor vehicles if the lessor:
- properly completes and timely files with the chief appraiser the Lessor’s Rendition or Property Report for Leased Automobiles (Form 50-288);
- properly completes and timely files with the chief appraiser the Lessor’s Application for Personal Use Lease Automobile Exemptions (Form 50-286);
- receives Lessee’s Affidavit of Primarily Non Income Producing Vehicle Use (Form 50-285) that the lessee executed on or before the date on which the required forms that are enumerated in paragraphs (1) and (2) have been filed; and
- maintains each Lessee’s Affidavit of Primarily Non Income Producing Vehicle Use (Form 50-285) that pertains to each leased motor vehicle for which the lessor seeks an exemption;
- A chief appraiser may inspect and/or obtain copies of lessees’ affidavits that the lessor maintains.
- A lessor and a chief appraiser shall use the following procedures when the chief appraiser proposes to inspect lessees’ affidavits on leased motor vehicles for which the lessor seeks an exemption.
- No less than 10 days prior to the inspection, the chief appraiser shall provide the lessor with notice of the chief appraiser’s intention to inspect the lessees’ affidavits in the lessor’s possession or control. The notice must state a reasonable date and time when the chief appraiser proposes to inspect the lessees’ affidavits and shall identify the affidavits that will be subject to inspection.
- If the proposed date or time is not convenient, then the lessor may propose an alternate reasonable date or time by notifying the chief appraiser in writing.
- The lessor shall provide the chief appraiser with reasonable accommodations to inspect and copy any of the lessees’ affidavits, or shall permit the chief appraiser to take the affidavits off premises for a period of no less than 48 hours to inspect and copy.
- The lessor may provide electronic images of the lessees’ affidavits, unless the chief appraiser does not have equipment to receive or read electronic images. If the image is not sufficiently clear to distinguish the characteristics of a lessee’s handwriting and to see the notarized signature and any other relevant details, the chief appraiser may request to inspect an original lessee’s affidavit.
- If the lessor is located more than 150 miles from the appraisal district’s office, then the chief appraiser may submit a written request that the lessor either copy and mail the identified lessees’ affidavits or send the original affidavits to the chief appraiser for at least 14 days for inspection and copying. The chief appraiser and the lessor may determine who should bear the costs of copying and mailing.
- A chief appraiser should first attempt to obtain information from the lessor. If the lessor does not provide the requested information within the specified time period, then the chief appraiser may contact the lessee directly.
- A properly executed Lessee’s Affidavit of Primarily Non Income Producing Vehicle Use (Form 50-285) is prima facie evidence that the motor vehicle is not held for the production of income and is used primarily for non-income producing activities.
- A chief appraiser shall also consider the following evidence of primarily non-income producing use:
- an affidavit by the lessee’s spouse or other credible person who has information about the use of the leased motor vehicle and mileage records; and
- a statement by the lessee’s employer that the motor vehicle was not used or required to be used in the lessee’s employment.
- Since the rulemaking authority that is given the comptroller does not extend to the Appraisal Review Board, this subsection does not apply to proceedings or decisions of the Appraisal Review Board.
- If a chief appraiser has reason to question, in whole or in part, the validity of the lessor’s application for exemption, then the chief appraiser may investigate and shall notify the lessor of the chief appraiser’s intent to investigate. The notice that is required by this rule shall:
- identify the motor vehicle that the chief appraiser questions as qualifying for the exemption;
- state separately the reason for questioning the claimed exemption or lessee’s affidavit;
- specify the additional information that the chief appraiser seeks; and
- state the due date upon which the requested information must be delivered.
- If a chief appraiser determines that some of the motor vehicles that the lessor claims in the application for exemption do not qualify for exemption, then the chief appraiser may modify the exemption by disallowing the amount of value that the non-exempt leased motor vehicles represent, but shall grant the exemption on the remaining value of the leased motor vehicles. Any notice of modification or denial of the claimed exemption shall be made in accordance with the notice requirements of Tax Code, Section 11.43 and Section 11.45.
The three PROPOSED model forms follow with this article. They are the Lessee’s Affidavit of Primarily Non Income Producing Vehicle Use (Form 50-285); the two-page Lessor’s Application for Personal Use Lease Automobile Exemptions (Form 50-286); and the Lessor’s Rendition or Property Report for Leased Automobiles (Form 50-288). These forms are available from the Comptroller’s PTD by calling the toll-free number, 1-800-252-9121. In Austin, call (512) 305-9999. Or, send an e-mail request to email@example.com.
On March 15, the final forms were adopted; these forms are available on the Comptroller's Property Tax Forms Online web page.