January 17, 2023
Written by: Eleanor Kim, DMA Tax Counsel
DuCharme, McMillen & Associates, Inc. (DMA) provides this information relating to the 88th Texas Legislature Regular Session.
The 88th legislative regular session commenced on January 10, 2023 and will end on May 29, 2023.
Many of the pre-filed tax bills were introduced in prior sessions and are reintroduced again for consideration by the incoming legislature. As in the past several sessions, property tax is still the focus of the legislators, whose constituents are still suffering high property taxes due to rapid market value appreciation that Texas has seen over the past few years. Approximately 30 bills and joint resolution bills have been filed so far to limit the appraised value of a residence homestead or to provide additional exemptions for certain individual groups on their residence homestead. Because Texas does not have a state property tax, the Texas legislature has fiddled with the property tax appraisal methods and appeals process to make the system more transparent for taxpayers, but the legislators’ options to grant property tax relief demanded by constituents are limited. Though property tax bills will continue to garner attention, DMA predicts that in this session, the legislators will also consider more state tax bills because of Texas’ budgetary surplus.
At the beginning of each legislative session, the Texas Comptroller prepares the Biennial Revenue Estimate (“BRE”) Report, which estimates the funds available from taxes and other revenue sources for the state’s next two-year budget cycle. One day before the start of the session, Comptroller Glenn Hegar released his BRE Report, which estimates that Texas is projected to have a record $188.2 billion in revenue available for general-purpose spending during the 2024-25 biennium, a 26.3% increase from the 2022-23 biennium. This surplus should make it easier for the legislators to consider tax cuts that have been put on the back burner for the past several sessions.
Following are summaries of tax bills that have been filed to date.
Jump to bills by tax type:
SALES/USE TAX
HB 24 (Neave Criado, Victoria) would add Tax Code §151.3132 to exempt the sale of maternity clothing.
HB 28 (Neave Criado, Victoria) would amend Tax Code §151.313 to exempt the sales of children’s diapers and baby wipes. SB 340 (Springer, Drew) would exempt the sale of a diaper. HB 199 (Howard, Donna) would exempt the sale of a diaper, an absorbency undergarment, or a guard or pad used for protection against urinary or colonic leakage.
HB 38 (Murr, Andrew) would increase the state tax rate from 6.25% to 12% to replace revenue lost from the proposed repeal of school districts’ maintenance and operation property tax. The bill would also increase the tax rates of motor vehicle gross rental receipts taxes.
HB 70 (Howard, Donna), HB 510 (Wu, Gene), and SB 128 (Springer, Drew) would exempt the sales of feminine hygiene products. HB 1265 (Button, Angie) and SB 379 (Huffman, Joan) propose the same exemption but would also exempt wound care dressing.
HB 105 (Noble, Candy) and SB 65 (Zaffirini, Judith) would amend Tax Code §151.0038 to exclude from taxable information services the furnishing of an academic transcript.
HB 164 (Canales, Terry) and SB 278 (Eckhardt, Sarah) would add Tax Code §151.3211 to exempt textbooks purchased by a full-time or part-time student enrolled at an institution of higher education or a private or independent college or university that is located in Texas if the purchase takes place during a seven-day exemption period designated by the Comptroller in January and in August of each year.
HB 346 (Jetton, Jacey) would add Tax Code §151.3271 to exempt the sale of school supply purchased for use by a teacher in a primary or secondary school if the sales price of the school supply is less than $100.
HB 688 (Cole, Sheryl) would add Tax Code §151.3271 to exempt the sale of a personal computer or a tablet if the item is purchased during the sales tax holiday in August and has a sales price of $500 or less. The bill would exclude a smartphone from the exemption.
HB 1037 (Meza, Terry) would amend Tax Code §151.313 to exempt the sale of a taxable item that is used to assist a person with an intellectual, developmental or cognitive disability with activities of daily living.
HB 1158 (Darby, Drew) would modify the eligibilities of a clean energy project that may claim the exemption provided by Tax Code §151.334 (Components with Sequestration of Carbon Dioxide). The bill would amend Chapter 382, Health & Safety Code, which currently limits qualifying projects to electricity generation, to include projects that utilize technology to capture, use, reuse, store, or sequester carbon dioxide emissions for the principal purpose of preventing carbon dioxide from entering the atmosphere; and are constructed integral or adjacent to a petrochemical plant or an electric generation facility, including a facility powered by coal, natural gas, hydrogen, or ammonia.
HB 1216 (Dean, Jay) would amend the definition of a “marketplace seller” provided by Tax Code §151.0242(a)(3) to include the seller’s affiliate who makes a sale of a taxable item through a marketplace. The term “affiliate” means a person who controls, is controlled by, or is under common control with another person.
SB 327 (Hall, Bob) would amend Tax Code §151.3565(b) to add to the eligible list of exempt emergency preparation items to include the following: (1) hand warmers; (2) lantern tools; (3) highway flares; (4) sewing kits; (5) swiss army knives; (6) nylon ropes that are no longer than 50 ft; (7) foldable shovels; (8) wrenches; (9) pliers; (10) sleeping bags; (11) waterproof matches; and (12) water purifiers.
LOCAL SALES/USE TAX
HB 432 (Schofield, Mike) would amend Tax Code §321.203(e) (City Sales/Use tax) and Tax Code §323.203(e) (County Sales/Use Tax) to provide a default sourcing rule that if a taxable item is stored in Texas and none of the regular sourcing rules that are based on a place of business in Texas applies, then the sale of the taxable item is sourced where the item was stored immediately before shipment, delivery or transfer of possession to the customer. The bill would change the current default sourcing rule from destination to origin.
HB 640 (Johnson, Julie) would amend Tax Code §327.007 to allow municipalities to hold elections to reauthorize the special street maintenance tax for another four years or for a longer period (either eight or ten years) if the tax has already been approved by voters twice for four-year periods.
SB 333 (Schwertner, Charles) would amend Tax Code §321.203 (City Sales/Use Tax) to provide that an agreement between a retailer and a city under Chapter 380 or a Type A or B development corporation that was in effect as of August 31, 2019, regarding a place of business would remain a place of business of the retailer for the term of the agreement notwithstanding any other law. The bill further reiterates that during the term of the agreement, the sale of a taxable item is deemed to be consummated at that place of business if the sale would have been consummated at that place of business under the law in effect on August 31, 2019.
FRANCHISE TAX
HB 391 (Goldman, Craig) and HB 1226 (Metcalf, Will) would repeal Chapter 171, Tax Code, effective January 1, 2024.
HB 1058 (Goldman, Craig) would provide a franchise tax credit to a taxable entity that has a direct or indirect interest in a development in Texas that the Texas Department of Housing and Community Affairs determines is eligible for a federal low-income housing credit and that meets certain requirements.
HB 1118 (Thierry, Shawn) would provide a franchise tax credit to a taxable entity for opening a grocery store or a healthy corner store in certain distressed areas.
HB 1280 (Oliverson, Tom) would amend Tax Code §171.1013 to prohibit a taxable entity from including in the compensation deduction any cost of health care benefits if the entity’s health care benefits include abortion coverage or if the entity provides sick leave related to abortion.
SB 356 (Hall, Bob) would allow a taxable entity to claim a franchise tax credit if the taxable entity registers with, and participates in, the E-verify program to verify employee information for a period of at least 12 consecutive months.
GENERAL
HB 563 (Raymond, Richard) would prohibit the legislature and state agencies from identifying a state tax, including a regulatory tax, as another type of state charge such as a fee, levy, surcharge, assessment, fine or penalty, in any new statute or resolution or in any agency rule.
HB 787 (Patterson, Jared) would add Chapter 1, Tax Code, to make a business ineligible for any tax incentives if the business assists employees in obtaining abortions.
HB 953 (Dutton, Harold) would require “tax preferences” to be reviewed by a Select Commission and would require the expiration of tax preferences if not reauthorized by the legislature after the Select Commission’s review and recommendation.
SB 61 (Zaffirini, Judith) would amend Tax Code §111.0047 to allow the Comptroller to send notices electronically to permit holders or license holders who elect such method of communication.
SB 103 (Johnson, Nathan) would require the Comptroller to identify state and local tax preferences and develop a schedule to periodically review each state and local tax preference every six years. The bill would require the Legislative Budget Board to review the Comptroller’s information and issue a final report making recommendations to the legislature as to whether each tax preference examined should be continued, amended, or repealed.
INSURANCE PREMIUM TAX
HB 619 (Shaheen) would allow an entity that contributes to the Education Assistance Organization to claim a credit against the entity’s state premium tax liability.
HB 1058 (Goldman, Craig) and SB 325 (Perry, Charles) would provide a tax credit to an entity that has a direct or indirect interest in a development in Texas that the Texas Department of Housing and Community Affairs determines is eligible for a federal low-income housing credit and that meets certain requirements.
SB 176 (Middleton) would allow an entity that contributes to the Texas Parental Empowerment Program to claim a credit against the entity’s state premium tax liability. The Texas Parental Empowerment Program would provide funding for approved education-related expenses of eligible children admitted into the program.
MOTOR FUEL TAX
HB 321 (Lopez, Ray) would add Tax Code §162.1021 to provide for an annual tax rate change according to the highway cost index for the 12-month moving average of the price of materials and labor compiled by the Texas Department of Transportation.
HB 654 (Bailes, Ernest) would amend Tax Code §162.204 to exempt diesel fuel sold to a hospital licensed under Chapter 241, Health & Safety Code (Texas Hospital Licensing Law) for the hospital’s exclusive use and would amend Tax Code §162.227 to authorize the hospital to obtain a refund if it paid tax on diesel fuel that is used in an exempt manner.
SB 254 (Eckhardt, Sarah) would increase the tax rates for motor fuel taxes from 20 cents to 40 cents per gallon.
MOTOR VEHICLE SALES/USE AND RENTAL RECEIPTS TAX
HB 38 (Murr, Andrew) would increase the tax rates for motor vehicle rentals from 10% to 19% for rentals of 30 days or less and from 6.25% to 12% for rentals of more than 30 days to replace revenue lost from the proposed repeal of school districts’ maintenance and operation property tax. The bill would also increase the state sales/use tax rate.
HB 747 (Dean, Jay) would amend Tax Code §152.0412 to lower the tax base to which the tax rate is applied on the sale of a used vehicle from 80% to 50% of the standard presumptive value.
NEW TAX
HB 43 (Spiller, David), HB 268 (Toth, Steve) and HB 577 (Leo-Wilson, Terri) would add a value added tax to replace the following taxes that would be repealed: (1) sales/use tax (chapter 151); (2) motor vehicle sales/use tax (chapter 152); (3) cigarette tax (chapter 154); (4) cigars and other tobacco tax (chapter 155); (5) hotel occupancy tax (chapter 156); (6) manufacturing housing sales/use tax (chapter 158); (7) boat and boat motor sales/use tax (chapter 160); (8) sales/use tax on aircraft (chapter 163); (9) franchise tax (chapter 171); (10) gross receipts and mixed beverage tax (chapter 183); (11) miscellaneous occupation taxes (chapter 191); (12) inheritance tax; and (13) local sales/use taxes. The bill would repeal school districts’ maintenance and operation property tax and would allow local jurisdictions that currently impose local sales/use tax to impose local value added tax. [Note: Inheritance tax under Chapter 211 was repealed in 2015.]
HB 88 (Goodwin, Vikki) would add Chapter 165, Tax Code, to impose a 1% tax on each sale by a dealer of ammunition, a firearm, or a firearm accessory. The tax would be imposed in addition to sales/use tax imposed under Chapter 151, Tax Code. Revenue from the tax would be appropriated to the Health and Human Services Commission to provide funding for the family violence program established under Chapter 51, Human Resources Code.
HB 447 (Thierry, Shawn) would enact Chapter 165, Tax Code, to impose an additional sales tax on the sale of assault weapons. The tax rate is 1,000% of the greater of the sales price of the weapon or presumptive retail price of the weapon. The tax would be imposed in addition to sales/use tax imposed under Chapter 151, Tax Code. Revenue from the tax may be appropriated only to the Texas Education Agency to provide funding to public schools to improve campus safety.
SB 339 (Springer, Drew) would impose a new 1.5% sales tax on e-cigarettes and vapor products that may or may not contain nicotine, including “bundled transactions” in which related items are sold/provided together. The tax would be imposed in addition to sales/use tax imposed under Chapter 151, Tax Code.
SEVERANCE TAX
HB 228 (Goodwin, Vikki) proposes to: (1) repeal the exemption from gas production tax for gas produced from oil wells with oil and lawfully vented or flared; (2) impose a 25% tax on the market value of such gas; and (3) provide an annual exemption for flared or vented gas at the producer’s election of 1,000 mcf or 0.5% of the total amount of gas produced in the state by the producer during the calendar year.
HB 591 (Capriglinone, Giovanni) would amend Chapter 201, Tax Code (Natural Gas Production Tax), to provide that gas produced from a qualifying well that is consumed on the well site and that would otherwise have been lawfully vented or flared is not subject to the natural gas production tax. The term “qualifying well” means (i) a well that is connected to a pipeline on which takeway capacity is not expected to meet the demand for gas produced by the well; (ii) is not connected to a pipeline and for which connection to a pipeline is technically or commercially unfeasible but is operated by a well operator who has contractually dedicated the well, the gas produced from the well, or the land or lease on which the well is located to a pipeline operator; or(iii) is not connected to a pipeline and is operated by a well operator who has not contractually dedicated the well the gas produced from the well, or the land or lease on which the well is located to a pipeline operator.
SB 255 (Eckhardt, Sarah) would repeal Tax Code §201.057, which currently provides a temporary reduced tax rate on certain high-cost gas and would provide that the tax reduction does not apply to gas produced on or after the effective date of this act, regardless of the Comptroller’s prior approval.
SB 256 (Eckhardt, Sarah) would amend Chapter 201, Tax Code (Natural Gas Production Tax), to: (1) impose an additional 25% tax on gas produced and flared or vented in Texas; (2) delete the exemption in Tax Code §201.053 for gas produced from oil wells that is lawfully vented or flared; (3) clarify that several tax benefits that currently exist do not apply to flared or vented gas; (4) provide an annual, non-transferrable exemption from the flaring tax at the election of each producer equal to either 1,000 mcf or 0.005 percent of the producer’s Texas production during the calendar year; (5) require the Comptroller to provide procedures for a producer to claim the exemption; (6) disallow the value of gas that is flared or vented or any cost associated with flaring or venting gas from being deducted from the tax base as marketing cost deduction; (7) require the Comptroller to determine and publish a monthly average for all gas produced and saved in the state with no deduction for marketing costs; and (8) require producers to keep records that include the amount of gas produced and saved and the amount of gas produced and flared or vented, and report such amount on the Producer’s Report.
PROPERTY TAX
(does not include bills related to residence homestead)
HB 43 (Spiller, David), HB 268 (Toth, Steve), and HB 577 (Leo-Wilson, Terri) would replace various state taxes (including sales/use tax) with a value added tax and would repeal school districts’ maintenance and operation property tax, but allow local jurisdictions that currently impose local sales/use tax to impose local value added tax.
HB 38 (Murr, Andrew) would repeal school districts’ maintenance and operation property tax and would replace the revenue by increasing the tax rates for sales/use tax (from 6.25% to 12%), motor vehicle rental receipts tax for rental of 30 days or less (from 10% to 19%), and motor vehicle rental tax for rental of more than 30 days (6.25% to 12%).
HB 40 (Zwiener, Erin) would provide a property tax exemption for the appraisal value of a property that is attributable to a graywater or rainwater harvesting system.
HB 145 (Vasut, Cody), HB 746 (Dean, Jay), and HB 1224 (Metcalf, Will) would extend the limitation cap on the annual increase of appraised value that currently applies to residence homestead to all real properties. HB 335 (Bell, Cecil) has the same proposal but would also reduce the limitation cap from 10% to 5%. HB 665 (Bailes, Ernest) would impose a 3.5% limitation cap on the annual appraisal increases of commercial real properties and would define the term “commercial real property” to mean real property zoned or otherwise authorized for, and actually used for, a purpose other than single-family use, multifamily use, heavy industrial use, or use as a quarry. SB 178 (Kolkhorst, Lois) would impose a 20% limitation cap on the annual appraisal increases of non-homestead real properties.
HB 159 (Landgraf, Brooks) would amend Tax Code §26.04 to require that tax rates be published in a newspaper when they are posted on the taxing unit’s Internet website. This requirement would be in addition to the current requirement that the information be posted prominently on the taxing unit’s website.
HB 234 (Bernal, Diego) would add Property Code §12.0014 to disclose the sales price of a commercial and industrial real property when recording the conveyance instrument at a county.
HB 543 (Raymond, Richard) would add Tax Code §23.015 to allow the exclusion of improvement value from the appraisal value if the primary purpose of the improvement or feature is to comply with certain provisions of the Americans with Disabilities Act of 1990.
HB 623 (Harris, Cody) would add Tax Code §11.162 to allow a property owner who sells animal feed that is exempted from sales/use tax under Tax Code §151.316(a)(3) or (4) to claim a property tax exemption on such property if it is held out for sale at retail.
HB 634 (Lozano, Jose) would amend Tax Code § 23.51 to shorten the period for qualification as agricultural land from five years to two years
HB 796 (Button, Angie) would require chief appraisers to create and maintain a publicly available and searchable Internet database that contains certain information regarding protest hearings conducted by the appraisal review board (ARB) in their districts.
HB 971 (Goodwin, Vikki) would amend Government Code §403.302 to change the cycle that the Comptroller conducts the property value study (PVS) from two years to four years. HB 1324 (Schatzline, Nate) would amend Government Code §403.302 to require the Comptroller, in performing the PVS, to only consider a sale of property if the sale occurred during the preceding year and would modify the margin of error that the Comptroller uses in determining the validity of a school district value from 5% to a range of 90% to 105% of the state value.
HB 1228 (Metcalf, Will) would amend Tax Code §25.195 to require that upon request by a property owner or a designated agent, a chief appraiser must electronically provide information (e.g., records, supporting data, schedules and other data) that the chief appraiser used to appraise the property owner’s real property value. The bill would impose a similar requirement to private appraisal firms.
HB 1285 (Shine, Hugh) would amend Tax Code §6.052 to allow for the board of directors to appoint deputy taxpayer liaison officers, and would set out procedures or methods by which taxpayer liaison officers may resolve complaints filed by property owners.
HB 1301 (Geren, Charlie) would amend Tax Code §25.25 (relating to Correction of Appraisal Roll) and Tax Code §41.01 to require an ARB to consider and issue a written order if a property owner timely files a motion for correction or timely files a protest, and would preclude an ARB from ruling that the property owner has forfeited the right to file if the filing was timely.
HB 1317 (Shine, Hugh) would add Tax Code §1.0851 to provide that with respect to communication that is required or permitted by law to be delivered between a tax official and a property owner, the property owner may elect to receive such communication electronically.
HB 1319 (Shine, Hugh) would add Tax Code §31.011 to authorize a property owner to elect to pay by electronic means.
SB 102 (Johnson, Nathan) would amend Tax Code §41.43 (Protest of Determination of Value or Inequality of Appraisal) and Tax Code §42.26 (Remedy for Unequal Appraisal) to require the selection of comparable properties from within the appraisal district, and would permit the selection of comparable properties from outside the appraisal only if there is an insufficient reasonable number of comparable properties within the appraisal district.
If you have questions about the impact these bills may have on your business, contact our team today to consult with a DMA tax expert.
This website content should be used for general informational purposes only, and not as a substitute for consultation with professional tax, legal, or other competent advisors. Before making any decision or taking any action based upon information contained on this website, you should consult with a DMA professional.
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