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Texas Legislative Update | February 19, 2019

by DMA Staff | Feb 19, 2019
DMA-Texas-Legislative-Update-Feb-19-2019

Sales Tax | Franchise Tax | General Tax | Hotel Occupancy Tax
Miscellaneous Gross Receipts Tax | Motor Vehicle Sales Tax | New Tax | Property Tax

DMA - DuCharme, McMillen & Associates, Inc. provides this information relating to the 86th Texas Legislature Regular Session.

Property tax continues to dominate in bill filings and in legislative tax discussions. The Senate Committee on Property Tax took public testimony on SB 2 (Bettencourt, Paul), the omnibus bill titled the Texas Property Tax Reform and Relief Act of 2019; and on February 11, 2019, it adopted 15 technical amendments to the bill. Here are some of the changes made:

  • SB 2, as introduced, proposes to reduce the rollback rate from 8% to 2.5% for all taxing units with more than $15 million in combined property tax and sales tax revenue. The committee added a proposal that would require small taxing units that fall below the $15 million threshold to hold an election to allow voters in those taxing units to decide to reduce their rollback tax rate from 8% to 2.5%.
  • SB 2, as introduced, proposes to change the term “effective” tax rate to “no new taxes” tax rate. The committee adopted a proposal to also change the term “rollback tax rate” to “voter-approved tax rate”.
  • SB 2, as introduced, would require large counties to create special panels to hear the protests involving high-valued properties. The committee adopted an amendment to specify that a protest may not be heard by the special panel unless the property owner or agent requests it or consents to it.
  • SB 2, as introduced, proposed date changes to the property tax calendar, but the committee amended the provision to retain the current schedule for providing notices of appraised value, protesting value, and completing appraisal rolls.
  • SB 2 was amended to require one public hearing on proposed tax rates instead of two hearings.
  • SB 2 was amended to require an appraisal review board’s order to separately state the values of land and improvement.
  • SB 2 was amended to require appraisal districts to use appraisal manuals that comply with generally accepted appraisal methods and techniques.

The House Ways & Means Committee held its organizational meeting on February 13, 2019, and Comptroller Glenn Hegar and his staff presented information on the budget, tax collection and property tax administration. The House Ways & Means Committee’s first hearing to hear tax bills will be February 27, 2019; but it has not yet issued a schedule of the bills to be heard.

Bills can be accessed on Texas Legislature Online at https://capitol.texas.gov/

Tax Bills

Following are the tax bills that have been introduced since DMA’s legislative update dated February 5, 2019. It excludes some newly-introduced bills that are identical to bills previously introduced and summarized.

Sales Tax

HB 1543 (Springer, Drew) would add subchapter A to Chapter 2301, Occupation Code, to require manufacturers of off-highway vehicles to report warranties provided to vehicles sold by non-Texas retailers to Texas residents to the Department of Motor Vehicles, and would require the Comptroller to review the reports for use tax assessment purposes.

HB 1727 (Meza, Terry) would exempt the sale of a U.S. flag or a Texas state flag.

HB 1729 (Murphy, Jim) would amend Tax Code §151.424 to provide that the prepayment discount is the lesser of 1.25% or an annually adjusted percentage of the amount of the prepayment that yields an annualized rate of return equal to the prime rate published in The Wall Street Journal on the first business day of each calendar, plus 4%. The Comptroller would compute the percentage and publish it by January 5 of each year.

SB 843 (Fallon, Pat) would exempt taxable items sold to a person who is a member of the U.S. armed forces on active duty if the taxable items are sold by a seller physically located within the boundaries of a U.S. military installation.
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Franchise Tax

HB 1607 (Goldman, Craig) would allow a taxable entity that is a party to at least one contract subject to the requirements of 48 CFR, Chapter 2 to deduct from margin the costs allowable under Federal Acquisition Regulation for contracts, or subcontracts supporting those contracts, for the sale of goods or services to the federal government.
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General Tax

SB 687 (Perry, Charles)  would amend Tax Code §111.0075(b) to expand the prohibition period for direct solicitation based on audit information received from the Comptroller from 6 days to 30 days.

HJR 66 (Howard, Donna) proposes a constitutional amendment that subject to legislative appropriation, allocation and direction, the net revenue derived from a tax on the sale or use of cannabis or marijuana may be used only for the support and maintenance of an efficient system of public free schools.
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Hotel Occupancy Tax

HB 1633 (Kuempel, John) would amend Tax Code §352.002 to allow the commissioners court of a county with a population of not more than 50,000 and in which an annual peanut festival is held, to impose a county hotel occupancy tax.

HB 1634 (Kuempel, John) would amend Tax Code §352.002 to allow the commissioners court of a county with a population of 110,000 or more through which the Guadalupe River flows to impose a county hotel occupancy tax.
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Miscellaneous Gross Receipts Tax

HB 1581 ( Geren, Charlie) would amend Tax Code §182.022 to provide that tax may not be imposed on the gross receipts from the sale of electricity to a public school district customer.
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Motor Vehicle Sales Tax

SB 675 (Hughes, Bryan) would amend Tax Code §152.001(12) to modify the definition of "motor vehicle used for religious purpose" by eliminating the current requirements that it must be a trailer or is designed to carry more than six passengers and that it must be used by a church or religious society.
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New Tax

HB 1560 (Dutton, Harold) would impose a $1 tax on each title insurance policy that is written for delivery in Texas by a title insurance company authorized to engage in business in Texas and for which the full basic premium is charged. The Comptroller would collect the tax and would determine the frequency of the tax remittance except the Comptroller cannot require the reporting on a semi-annual basis or shorter period basis unless the tax liability for the preceding year was at least $2,500. 
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Property Tax
(excludes bills related to residence homestead)

HB 1409 (Ashby, Trent) and SB 701 (Nichols, Robert) would amend provisions relating to timber land or restricted-use timber land to provide that land could continue to qualify as timber land or restricted-use land even if a portion of the land is used for certain specified activities as long the remainder of the land meets the eligibility requirement. The excepted activities are: (1) used for a purpose associated with the production of timber or forest products, including use as a road, right-of-way, buffer area, or firebreak; (2) used as a right-of-way taken through eminent domain; or (3) used for oil and gas operations by a lessee.

HB 1414 (Craddick, Tom) and SB 717 (Lucio, Eddie) would amend Tax Code §11.18 to add to the list of qualifying charitable functions the following: providing a meeting place and support services for organizations that aid alcoholics and their families without regard to the beneficiaries' ability to pay.

HB 1444 (Patterson, Jared) would add Tax Code §26.095 to require that real property be appraised at the lesser of the appraised value of the property or the average appraised value of the property for the five-year period ending with the tax year for which the taxes are imposed. HJR 65 (Patterson, Jared) proposes a constitutional amendment that would authorize it.

HB 1484 (Metcalf, Will), HB 1485 (Metcalf, Will) and HB 1486 (Metcalf, Will) would require that the voters of a county elect the members of an appraisal district board of directors, the chief appraiser, and the members of the appraisal review board, respectively.

HB 1526 (Bell, Cecil) would exempt a nursery stock weather protection unit, as defined by Agricultural Code §71.041, as an implement of husbandry.

HB 1596 (Lambert, Stan) and HB 1606 (Lambert, Stan) would add local option exemptions for qualifying veteran-owned businesses and for qualifying businesses that provide qualifying services or assistance to qualifying veterans, respectively.

HB 1743 (King, Tracy) would change the additional tax imposed for changes diverting land from agricultural use and timber land from five years to three years and would change the annual interest rate imposed from 7% to 5%.

HB 1745 (Geren, Charlie) would add a new subchapter to Chapter 41, Tax Code, to allow a property owner or agent to file a limited lawsuit against an appraisal district, a chief appraiser, or an appraisal review board to compel compliance with a procedural requirement in an appraisal review board’s protest matter that the property or agent has filed.

HB 1802 (Bohac, Dwayne) would change the deadline to appeal an appraisal review board’s order from 45 days to 60 days.

HB 1815 (Sanford, Scott) would amend Tax Code §21.09 to change the deadline to file the allocation application from April 1 to May 1. [Note: The deadline was May 1, for tax years before January 1, 2018 but was changed to April 1, effective January 1, 2018.]

HB 1816 (Beckley, Michelle) and SB 853 (Johnson, Nathan) would amend Tax Code §41.43, which currently provides that an appraisal district may prevail in a protest that is based on an unequal appraisal challenge if it could show the appraised value is equal to or less than the median of a reasonable number of comparable properties, by modifying it to require the appraisal district to show that the appraisal ratio that is equal to or less than the median level of appraisal of a reasonable number of comparable properties in the appraisal district.

SB 597 (Buckingham, Dawn) would prohibit an appraisal district or an appraisal review board from charging a fee to a property owner to file a protest. SJR 36 (Buckingham, Dawn) proposes a constitutional amendment for the prohibition.

SB 598 (Buckingham, Dawn) would prohibit an appraisal review board from increasing the appraised value of property over the amount submitted by the chief appraiser to the board.

SB 599 (Buckingham, Dawn) would prohibit an appraisal district from offering as evidence in a protest hearing comparable properties unless the district provides a statement to the property owner in the protest hearing that the comparable property is or was the subject of a protest for that tax year.

SB 600 (Buckingham, Dawn) would move current appraisal deadlines two weeks earlier and would require elections to ratify tax rates that exceed rollback rates by all taxing units.

SB 635 (Flores, Pete) would provide that the chief appraiser is entitled to a copy of the affidavit that a property owner submits to an appraisal review board hearing and would require the appraisal review board and the chief appraiser to review the evidence and argument before the protest hearing. The bill also would add a new provision that would allow a property owner to bring an appeal to a justice court if: (1) the appeal relates only to a determination of appraised value or eligibility for an exemption from taxation; and (2) the amount of taxes due on the portion of the taxable value of the property that is in dispute, calculated using the preceding year's tax rates, is $5,000 or less.

SB 728 (Kolkorst, Lois) would amend Tax Code §313.032(c) to require recipients (current and former) of an agreement for an appraised value limitation under the Texas Economic Development Act to hire an independent certified public accountant to verify the data certified to the Comptroller.

SB 836 (Miles, Borris) and HB 1841 (Thompson, Senfronia) would amend Tax Code §23.21 to provide that in appraising an affordable housing unit that is subject to an eligible land use restriction, the chief appraiser may not appraise the unit for an amount that exceeds the price for which the housing unit may be sold under the land use restriction.

SB 854 (Johnson, Nathan) would amend Tax Code §42.29 to provide that a property owner may be awarded reasonable attorney’s fees if the property owner prevails under the claim of excessive appraisal or unequal appraisal and if the appraised value of the property as determined by the court is less than 90% of the appraised value according to the appraisal roll. The amount is subject to current limitations provided by law. The bill would limit an appraisal district’s award of reasonable attorney’s fee to $100,000, if the district prevails under the same grounds and the appraised value of the property as determined by the court is at least 10% greater than the appraised value according to the appraisal roll.
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