Senate Bill 248 allows cities this choice, according to Finance Director Keith Dagen, who appeared before City Council on Nov. 18 to discuss this change. At the time that bill was passed in 2002, Richardson opted to continue taxation, Dagen added.
The practice of levying a property tax on personal-use leased vehicles has become less common. Of the 13 cities in North Texas that are most comparable to Richardson, eight choose to exempt these vehicles from taxation, Dagen said. Those cities include Allen, Arlington, Dallas, Fort Worth, Grand Prairie, Irving, McKinney and Plano.
Council members expressed mixed feelings about the practice. While most agreed that the tax unfairly penalizes citizens who choose to lease over buy, some argued that in the era of Senate Bill 2—which caps the amount of property tax dollars cities can collect—every little bit of added revenue is needed to sustain the city’s budget.
In Richardson, personal-use leased vehicles brought in $404,324 in property tax revenue in fiscal year 2019-20, Dagen said. Leasing companies subsidize this taxation by building the cost into leasing agreements, he added.
Property taxes collected on leased vehicles can help support road infrastructure maintenance, Mayor Paul Voelker said. Still, he expressed discontent with the fact that purchased vehicles are exempt from property taxes.
“I find it ironic that the actual thing that causes the road to be deteriorated we don’t get tax revenue from,” he said.
If council chooses to exempt personal-use leased vehicles from taxation, it would have to pass an ordinance, City Manager Dan Johnson said. Once this change is made, it cannot be rescinded, Johnson added.
The ordinance, if ratified, would not affect the property tax levied on commercial leased vehicles, which in fiscal year 2019-20 produced a revenue of $10.5 million, Dagen said.
The Collin County Appraisal District has asked for a decision on the change by July 1, Dagen said. An earlier deadline of Jan. 1 has been set by the Dallas County Appraisal District due to the extensive programming required to make the change, Dagen said.