(a) Before license plates are issued or delivered to the owner of a vehicle that is exempt by law from payment of registration fees, the department must approve the application for registration. The department may not approve an application if there is the appearance that:

1. (1) the vehicle was transferred to the owner or purported owner:

   1. (A) for the sole purpose of evading the payment of registration fees; or
   2. (B) in bad faith; or
2. (2) the vehicle is not being used in accordance with the exemption requirements.

(b) The department shall revoke the registration of a vehicle issued license plates under this section and may recall the plates if the vehicle is no longer:

1. (1) owned and operated by the person whose ownership of the vehicle qualified the vehicle for the exemption; or
2. (2) used in accordance with the exemption requirements.

(d) A license plate under Subsection (c) is not issued annually, but remains on the vehicle until:

1. (1) the registration is revoked as provided by Subsection (b); or
2. (2) the plate is lost, stolen, or mutilated.

(f) The department shall provide by rule for the issuance of regularly designed license plates not bearing the word "exempt" for a vehicle that is exempt by law and that is:

1. (1) a law enforcement vehicle, if the agency certifies to the department that the vehicle will be dedicated to law enforcement activities;
2. (2) a vehicle exempt from inscription requirements under a rule adopted as provided by Section 721.003; or

3. (3) a vehicle exempt from inscription requirements under an order or ordinance adopted by a governing body of a municipality or commissioners court of a county as provided by Section 721.005, if the applicant presents a copy of the order or ordinance.

   Transferred, redesignated and amended from Transportation Code, Section 502.201 by Acts 2011, 82nd Leg., R.S., Ch. 1296 (H.B. 2357), Sec. 147, eff. January 1, 2012.