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Texas Legislative Update | February 5, 2019

by DMA Staff | Feb 05, 2019
Texas Legislative Update Blog February 5, 2019

Sales Tax | Franchise Tax | Motor Fuel Tax | New Tax | Severance Tax | Property Tax
Texas Emission Reduction Plan (TERP)

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

Committee assignments have been made, and introduced bills are being referred to committees for consideration. Tax bills are normally referred to the House Ways & Means Committee and to the Senate Finance Committee, but this session, the Senate Committee on Property Tax, a newly formed committee, will hear property tax bills in lieu of the Senate Finance Committee. DMA will provide committee actions on tax bills as committee hearings get underway.

Representative Dustin Burrows, the chairman of the House Ways & Means Committee, and Senator Paul Bettencourt, the chairman of the Senate Committee on Property Tax, have filed identical bills, HB 2 and SB 2, which are titled “The Texas Property Tax Reform and Relief Act of 2019”. They are the bills to watch this session. The two committee chairs joined Governor Greg Abbott, Lieutenant Dan Patrick, and Speaker Dennis Bonnen at a news conference to announce the filings of the bills. The state leaders touted the bills as the House’s and Senate’s first step toward reforming the state’s property tax system and that the bills would “increase transparency in the property tax system, empower property owners to take a more active role in rate setting, and slow the growth of property tax rates.” The bills propose, among others, the following:

  • Create the Property Tax Advisory Board to make recommendations to the Comptroller’s Property Tax Division regarding improving the effectiveness and efficiency of the property tax system, best practices, and complaint resolution procedures;
  • Create a searchable statewide database;  
  • Lower the rollback rate from 8% to 2.5% for all taxing units with more than $15 million in combined property and sales tax revenue;
  • Change the term “effective” tax rate to “no new taxes” tax rate and require the Comptroller to prescribe an electronic form of the worksheets to be used by each taxing unit in calculating the no new taxes tax rate and rollback tax rate;
  • Require a designated official of a taxing unit to certify the submission of “no-new taxes” tax rates;
  • Prohibit taxing units from adopting a tax rate until they are in compliance with the new notice and certification requirement; and
  • Create special panels to hear protest hearings for property that has an appraised value of at least $50 million and that falls within specified classifications (e.g., utilities, industrial and manufacturing, multifamily residential, and commercial).

Numerous proposals that are in the omnibus bills were introduced in 2017, but did not pass last session. The desire by the state leadership for some form of property tax relief may provide the needed momentum for the proposals to pass this session. SB 2 is already scheduled to be heard by the Senate Property Tax Committee on February 6, 2019.

If you want to review any of the bills that DMA has summarized, you can access the bills 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 January 24, 2019.

Sales Tax

HB 1077 (White, James) would increase the state sales tax rate from 6.25% to 7.25% and would allocate the revenue amount in excess of 6.25% to the Foundation School Fund.

HB 1083 (Raymond, Richard) would exempt the sale of beer or ale made on the Fourth of July if the seller holds a wine and beer retailer's off-premise permit under Chapter 26, Alcoholic Beverage Code.

SB 457 (Creighton, Brandon) would exempt the sale of a firearm or hunting supplies if the sale takes place during the last full weekend in August.
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Franchise Tax

HB 983 (Parker, Tan) would add a new Subchapter U, Chapter 171, Tax Code, to provide for a franchise tax credit for a person designated as an enterprise project under Chapter 2303, Government Code. The credit would be equal to 7.5% of the project’s qualified capital investment. For purposes of this credit, “qualified capital investment” means tangible personal property first placed in service by the enterprise project after January 1, 2015, that is described in Section 1245(a), Internal Revenue Code, such as engines, machinery, tools, and implements used in trade or business or held for investment and subject to an allowance for depreciation, cost recovery under the accelerated cost recovery system, or amortization.

HB 1068 (Ashby, Trent) would allow a taxable entity to claim a franchise tax credit for qualifying railroad expenditures, which include the following: (1) amounts to reconstruct or replace railroad infrastructure that was owned or leased by the taxable entity on January 1, 2019, including a track, a roadbed, bridge, an industrial lead, or another track related structure; or (2) amounts for new construction of an industrial lead, switch, spur, or siding or extension of existing siding. To qualify, the railroad must be classified as Class II or Class III as defined by the federal Surface Transportation Board.

HB 1089 (Darby, Drew) would amend “retail trade” to include the activities involving the rental of industrial uniforms, industrial garments, and industrial linen supplies that are classified as Industry 7213 or 7218 of the 1987 Standard Industrial Classification Manual, which would allow such entities to be eligible for the lower tax rate provided to retailers and wholesalers.

SB 570 (Creighton, Brandon) would allow a taxable entity to claim a franchise tax credit of $1,000 for each eligible student who completes an eligible internship program offered by the taxable entity in Texas. 
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Motor Fuel Tax

HB 1248 (Ashby, Trent) would allow a credit or a refund for tax paid on diesel fuel used by auxiliary power units or power take-off equipment on any motor vehicle. The credit or refund would be phased-in by allowing the Comptroller to reduce the credit or refund amount by a specified discount percentage that incrementally decreases each year until January 1, 2023. 
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New Tax

HB 1144 (Thierry, Shawn) would add Chapter 164, Tax Code, to impose a tax on each sale of e-cigarette vapor products. The tax rate would be five cents for each milliliter or fractional part of a milliliter of vapor product sold. The tax would be in addition to sales/use tax that is due and would be administered, collected and enforced in the same manner as sales/use tax under Chapter 151, Tax Code.

HB 1275 (Lucio, Eddie) would enact Chapter 2005, Occupation Code, regulating persons who operate a sports betting program and would impose a tax of 6.25% on each bet placed by a sports bettor. The revenue collected would be allocated to the Foundation School Fund.
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Property Tax
(Excludes numerous bills that have been filed relating to residence homestead)

HB 1050 (Lucio, Eddie) would amend several provisions of Tax Code §25.19 that would allow the chief appraiser to satisfy current duties imposed on the chief appraiser to provide certain information by directing the property owner to the appraisal district's website from the which the property owner may access the information.

HB 1056 (Bohac, Dwayne) would amend Tax Code §11.252 to provide leased motor vehicles are not presumed to be used in the production of income if:  (1) they are motor vehicles leased to the state or to a political subdivision of this state; or (2) they are motor vehicles leased to an organization that is exempt from federal income tax under IRC §501(c)(3) and would be exempt if the motor vehicles were owned by the organization.

HB 1060 (Bell, Cecil) would require an appraisal review board (ARB) to deliver the hearing notice by certified mail or by electronic mail if the property owner requests delivery by such method.  

HB 1081 (Raymond, Richard) would authorize the ARB, upon a property owner’s motion, to issue an order directing that the appraisal roll or related appraisal records for the current tax year and for either of the two preceding tax years to correct an inaccuracy in the appraised value of the owner’s tangible personal property that is the result of an error or omission in a rendition statement or property report filed under Chapter 22.  The appraisal roll may not be changed if: (1) the property owner did not timely file the rendition statement; (2) the ARB, after hearing evidence and arguments, made a value determination on the merits; or (3) the parties entered into a written agreement on the value.

HB 1188 (Hefner, Cole) would allow land to be appraised as an agricultural land even when a new owner fails to timely file an application if the new owner is related to the prior owner within the second degree by affinity or third degree by consanguinity.

HB 1194 (Dutton, Harold) would add Tax Code §11.1828 to exempt from property tax by a school district of improved and unimproved real property, any part of which is located within a one-mile radius of the center of a campus of that school district or within a municipal management district that the person owns for the purpose of building low-income housing. HJR 58 by Representative Dutton proposes a constitutional amendment to authorize the exemption.

HB 1201 (Raymond, Richard) would amend Tax Code §11.18 to expand the list of qualifying charitable functions to include housing counseling services without regard to the beneficiary's ability to pay and rental housing to low-income and moderate-income individuals and families at below-market rate.

HB 1247 (Ashby, Trent) and SB 555 (Schwetner, Charles) would amend Tax Code §23.46 to provide that if additional taxes are due because the land has been diverted to a nonagricultural use as a result of a condemnation, the additional taxes and interest imposed are the personal obligation of the condemning entity and not the property owner from whom the property was taken.

SB 434 (Hinojosa, Chuy) would amend Tax Code §11.43 to prohibit the chief appraiser from enforcing a tax lien imposed on a property that was sold to an unrelated purchaser if the tax lien results from the revocation of an exemption that was determined to have been erroneously granted in a prior year. SJR 31 by Senator Hinojosa proposes a constitutional amendment to enact the prohibition.

SB 449 (Creighton, Brandon) would repeal Tax Code §42.23(i), effective January 1, 2020, which permits a court to give preference to an appraisal district’s employee who testifies as to the value of real property in an appeal that involves the claim of excessive value or unequal value if the employee is a licensed real estate appraiser.

SB 453 (Creighton, Brandon) would amend Tax Code §23.02 to require the chief appraiser to reappraise a property that is located partly or entirely inside an area declared to be a disaster area by the governor within 45 days of the declaration.  A property owner may refuse the reappraisal.

SB 474 (Hancock, Kelly) and HB 1254 (Murphy, Jim) would repeal Tax Code §23.42(a-1) which currently provides that “on or after January 1, 2008, an individual is not entitled to have land designated for agricultural use if the land secures a home equity loan described by Section 50 (a)(6), Article XVI, Texas Constitution.”

SB 565 (Campbell, Donna) would repeal Tax Code §313.025(f-1) which currently allows the governing body of a school district to waive the new jobs creation requirement.
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Severance Tax

SB 533 (Birdwell, Brian) would amend Tax Code §202.056 to reactivate the exemption for oil and gas produced from previously inactive wells. It would apply to two-year inactive wells with certain definitional changes and would reduce the exemption for hydrocarbons produced from a well from 10 years to 5 years.
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Texas Emission Reduction Plan (TERP)

HB 1043 (Blanco, Cesar) would amend Tax Code §151.0515 and Tax Code §152.0215 to extend the expiration date of the TERP surcharge from August 31, 2019 to the last day of the state fiscal biennium during which the Texas Commission of Environmental Quality (TCEQ) publishes in the Texas Register the notice required by Health and Safety Code §382.037 designating each area in Texas as attainment or unclassifiable or approving a redesignation substitute making a finding of attainment for the area.
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