Brief⁽¹⁾

S.B. 542, as amended, relates to fees for motor vehicle certificates of title; to verification of vehicle identification numbers (VIN); and to the taxation of aviation fuel.

Fees for Motor Vehicle Certificates of Title. These provisions would impose an additional $3 fee for a certificate of title issued by the Division of Vehicles for a repossessed vehicle. The additional fee would be deposited in the Repossessed Certificates of Title Fee Fund in the Department of Revenue created by the bill. All moneys credited to the Fund would be used by the Department of Revenue for funding the administration, operations, and personnel associated with the processing of certificates of title for repossessed vehicles.

Verification of VIN. The bill authorizes an employee of a new vehicle dealer, who has received training from the Highway Patrol in accordance with rules and regulations adopted by the Superintendent of the Highway Patrol, to verify the VIN. Such employee could provide VIN checks on motor vehicles repurchased or reacquired by the manufacturer and purchased by a new vehicle dealer, commonly known as "program cars."

Public Use General Aviation Airports. These provisions would impose a $.06 per gallon tax on aviation fuel beginning July 1, 1998. Receipts from the tax would be credited to the Public Use General Aviation Airport Development Fund within the Kansas Department of Transportation (KDOT) and used to provide grants to public use general aviation airports. The bill would clarify that the sale or delivery of gasoline, special fuels, and aviation fuels to retail dealers located on an Indian reservation in Kansas is tax-free only if the fuel is sold or delivered to a member of that reservation. The bill exempts from taxation the sale or delivery of aviation fuel to a public utility for consumption or movement directly and immediately in the course of interstate commerce.

Background

The bill, as introduced, was requested by Senator Harrington. The Director of Vehicles and the Director of Research of the Kansas Bankers Association appeared in support of the bill.

The Director of Vehicles testified that prior to December 1996, repossessed vehicle title applications were processed by the Division of Vehicles only for Kansas financial institutions who met the Division's titling requirements. She said that at the end of 1996, the Division began receiving out-of-state financial institutions' applications for repossessed titles for all their agencies (e.g., General Motors Acceptance Corporation) nationwide. The Division initially refused these applications; however, upon review of Kansas statutes by the Division's Legal Services Bureau, a determination was made that under K.S.A. 1997 Supp. 8-135, out-of-state financial institutions chartered in Kansas could process titles for repossessed vehicles from their nationwide agencies through the Division of Vehicles. The Director noted this change increased the number of repossessed title applications received and processed by the Title and Registration Bureau by an additional 41,316. The increased workload has resulted in delays in title deliveries to Kansas motor vehicle dealers, Kansas financial institutions, and Kansas citizens. The Director also explained that out-of-state financial institutions prefer the Kansas system for processing repossessed vehicle titles because Kansas title fees are less expensive and delivery time is quicker.

The Director of Research, Kansas Bankers Association, testified in support of the bill, indicating that S.B. 542 was the best way to address the increases in out-of-state title applications for repossessed vehicles.

No one appeared before the Senate Committee in opposition to the bill.

The Senate Committee amendment changed the fee for a certificate of title for repossessed vehicles from $2 to $3.

The Senate Committee of the Whole added the amendment relating to verification of a VIN by employees of new car dealers.

The Department of Revenue estimates between 1,000 and 1,500 certificates of title are processed each week for repossessed vehicles. Assuming there are 52,000 titles processed each year, the Division of Budget estimates the additional $3 fee would generate $156,000 for 1,000 titles and $234,000 for 1,500 titles for the Repossessed Certificates of Title Fee Fund during FY 1999. The Department also estimates that 3.0 additional FTE positions and associated salaries and wages, one-time capital outlay, and other operating expenditures would be required to process the expected volume of repossessed vehicle titles without slowing down the titling process for other vehicles. Estimated expenditures include $76,050 for salaries and wages, $17,400 for office setup, $828 for annual operating expenditures, and $3,292 for one-time programming changes.

The Department of Revenue indicates that the Committee of the Whole amendment would not change the above fiscal impact note.

The House Committee amendment incorporates the provisions of H.B. 2737 into S.B. 542. H.B. 2737 would impose a $0.6 tax on aviation fuel to fund improvements to public use general aviation airports (see the Supplemental Note on H.B. 2737).

The other Committee amendment would require a motor car dealer employee who verifies VINs to receive training from the Kansas Highway Patrol.

In the fiscal note written for H.B. 2737, KDOT estimates the bill would reduce funding to the State General Fund by $500,000 because the fuel would no longer be subject to the general sales tax. The Department also estimates that the bill's taxation of aviation fuel as motor fuel would provide $658,000 in FY 1999 and $718,000 in following fiscal years for the Public Use General Aviation Airport Development Fund. The estimate assumes that none of the sales are to common carriers which are exempted from the tax.

The agency indicates that expenditures equaling revenue from the fund would be made in FY 1999 and subsequent fiscal years to provide airport improvement grants.

1. *Supplemental notes are prepared by the Legislative Research Department and do not express legislative intent. The supplemental note and fiscal note for this bill may be accessed on the Internet at http://www.ink.org/public/legislative/fulltext-bill.html.