Bill Text: TX SB5 | 2023-2024 | 88th Legislature | Comm Sub
NOTE: There are more recent revisions of this legislation. Read Latest Draft
Bill Title: Relating to an exemption from ad valorem taxation of a portion of the appraised value of tangible personal property that is held or used for the production of income and a franchise tax credit for the payment of certain related ad valorem taxes.
Spectrum: Slight Partisan Bill (Republican 18-10)
Status: (Engrossed - Dead) 2023-04-10 - Referred to Ways & Means [SB5 Detail]
Download: Texas-2023-SB5-Comm_Sub.html
Bill Title: Relating to an exemption from ad valorem taxation of a portion of the appraised value of tangible personal property that is held or used for the production of income and a franchise tax credit for the payment of certain related ad valorem taxes.
Spectrum: Slight Partisan Bill (Republican 18-10)
Status: (Engrossed - Dead) 2023-04-10 - Referred to Ways & Means [SB5 Detail]
Download: Texas-2023-SB5-Comm_Sub.html
By: Parker, et al. | S.B. No. 5 | |
(In the Senate - Filed March 10, 2023; March 13, 2023, read | ||
first time and referred to Committee on Finance; March 21, 2023, | ||
reported adversely, with favorable Committee Substitute by the | ||
following vote: Yeas 16, Nays 0; March 21, 2023, sent to printer.) | ||
COMMITTEE SUBSTITUTE FOR S.B. No. 5 | By: Bettencourt |
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relating to an exemption from ad valorem taxation of a portion of | ||
the appraised value of tangible personal property that is held or | ||
used for the production of income and a franchise tax credit for the | ||
payment of certain related ad valorem taxes. | ||
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: | ||
ARTICLE 1. INCOME-PRODUCING TANGIBLE PERSONAL PROPERTY AD VALOREM | ||
TAX EXEMPTION | ||
SECTION 1.01. Section 11.145, Tax Code, is amended to read | ||
as follows: | ||
Sec. 11.145. INCOME-PRODUCING TANGIBLE PERSONAL PROPERTY | ||
[ |
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(1) "Related business entity" means a business entity | ||
that: | ||
(A) engages in a common business enterprise with | ||
at least one other business entity; and | ||
(B) owns tangible personal property that: | ||
(i) is held or used for the production of | ||
income as part of the common business enterprise; and | ||
(ii) is located at the same physical | ||
address that tangible personal property owned by at least one other | ||
business entity engaged in the common business enterprise is | ||
located. | ||
(2) "Unified business enterprise" means a common | ||
business enterprise composed of more than one related business | ||
entity. | ||
(b) Subject to Subsection (f) and except as provided by | ||
Subsection (d), a [ |
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taxation by a taxing unit of $25,000 of the appraised value of the | ||
tangible personal property the person owns that is held or used for | ||
the production of income and has taxable situs at the same location | ||
in the taxing unit [ |
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(c) [ |
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applies to each separate location in a taxing unit in which a person | ||
holds or uses tangible personal property for the production of | ||
income, and, for the purposes of Subsection (b) [ |
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that has taxable situs in each separate location in the taxing unit | ||
is aggregated to determine taxable value. | ||
(d) A person is entitled to an exemption from taxation by a | ||
taxing unit of $25,000 of the appraised value of the tangible | ||
personal property the person owns that is held or used for the | ||
production of income, has taxable situs at a location in the taxing | ||
unit, and is subject to a lease. | ||
(e) The exemption provided by Subsection (d) applies to each | ||
separate taxing unit in which a person holds or uses tangible | ||
personal property for the production of income. | ||
(f) For the purposes of Subsection (b), if a person is a | ||
related business entity, all property described by that subsection | ||
that has taxable situs at the same location in a taxing unit and | ||
that is owned by the person is aggregated with the property | ||
described by that subsection that has taxable situs at the same | ||
location in the taxing unit and that is owned by each other related | ||
business enterprise that composes the same unified business | ||
enterprise to determine taxable value for the entity. | ||
(g) A chief appraiser may investigate a business entity to | ||
determine whether the entity: | ||
(1) is a related business entity; and | ||
(2) has aggregated tangible personal property as | ||
provided by Subsection (f). | ||
SECTION 1.02. Section 22.01, Tax Code, is amended by | ||
amending Subsections (a), (c-1), and (f) and adding Subsections | ||
(j-1), (j-2), (j-3), and (n) to read as follows: | ||
(a) Except as provided by Chapter 24, a person shall render | ||
for taxation all tangible personal property used for the production | ||
of income that the person owns or that the person manages and | ||
controls as a fiduciary on January 1. A rendition statement shall | ||
contain: | ||
(1) the name and address of the property owner; | ||
(2) a description of the property by type or category; | ||
(3) if the property is inventory, a description of | ||
each type of inventory and a general estimate of the quantity of | ||
each type of inventory; | ||
(4) the physical address [ |
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of the property; and | ||
(5) the property owner's good faith estimate of the | ||
market value of the property or, at the option of the property | ||
owner, the historical cost when new and the year of acquisition of | ||
the property. | ||
(c-1) In this section: | ||
(1) "Related business entity" and "unified business | ||
enterprise" have the meanings assigned by Section 11.145. | ||
(2) "Secured party" has the meaning assigned by | ||
Section 9.102, Business & Commerce Code. | ||
(3) [ |
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assigned by Section 1.201, Business & Commerce Code. | ||
(f) Notwithstanding Subsections (a) and (b), a rendition | ||
statement of a person who owns tangible personal property used for | ||
the production of income located in the appraisal district that, in | ||
the owner's opinion, has an aggregate value of less than $20,000 is | ||
required to contain only: | ||
(1) the name and address of the property owner; | ||
(2) a general description of the property by type or | ||
category; and | ||
(3) the physical address [ |
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of the property. | ||
(j-1) Notwithstanding Subsections (a) and (b), a person is | ||
required to render tangible personal property the person owns that | ||
is held or used for the production of income only if, in the | ||
person's opinion and as applicable: | ||
(1) the aggregate market value of the property that | ||
has taxable situs in the same location in at least one taxing unit | ||
that participates in the appraisal district is greater than the | ||
amount exempted under Section 11.145(b); or | ||
(2) the aggregate market value of the property in at | ||
least one taxing unit that participates in the appraisal district | ||
is greater than the amount exempted under Section 11.145(d). | ||
(j-2) A person required to render property for taxation | ||
under Subsection (j-1) must render all tangible personal property | ||
the person owns that is held or used for the production of income | ||
and has taxable situs in the appraisal district. This subsection | ||
does not apply to property exempt from taxation under a provision of | ||
law other than Section 11.145. | ||
(j-3) A person who elects not to render property for | ||
taxation as authorized by Subsection (j-1) must file a rendition | ||
statement or property report that includes a certification that the | ||
person reasonably believes that the value of the property is not | ||
more than the amount exempted under Section 11.145(b) or (d), as | ||
applicable. The election takes effect beginning with the tax year | ||
following the tax year in which the rendition statement or property | ||
report is filed and continues in effect until the ownership of the | ||
person changes. Notwithstanding Subsection (j-1), a person | ||
described by that subsection must render property for taxation if | ||
required by the chief appraiser. | ||
(n) A rendition statement of a related business entity must | ||
contain the information required by Subsection (a) or (f), as | ||
applicable, stated for each related business entity that composes | ||
the unified business enterprise of which the related business | ||
entity that is the subject of the rendition is a part. | ||
SECTION 1.03. Section 22.24(c), Tax Code, is amended to | ||
read as follows: | ||
(c) The comptroller may prescribe or approve different | ||
forms for different kinds of property but shall ensure that each | ||
form requires a property owner to furnish the information necessary | ||
to identify the property and to determine its ownership, | ||
taxability, and situs. Each form must include a box that the | ||
property owner may check to permit the property owner to affirm that | ||
the information contained in the most recent rendition statement | ||
filed by the property owner in a prior tax year is accurate with | ||
respect to the current tax year in accordance with Section | ||
22.01(l). Each form must include a box that a property owner that is | ||
a related business entity, as defined by Section 11.145, must check | ||
to identify the owner as a related business entity. Each form must | ||
include a box that a property owner who elects not to render the | ||
property for taxation as authorized by Section 22.01(j-1) must | ||
check to certify that the owner reasonably believes that the value | ||
of the property is not more than the amount exempted under Section | ||
11.145(b) or (d), as applicable. A form may not require but may | ||
permit a property owner to furnish information not specifically | ||
required by this chapter to be reported. In addition, a form | ||
prescribed or approved under this subsection must contain the | ||
following statement in bold type: "If you make a false statement on | ||
this form, you could be found guilty of a Class A misdemeanor or a | ||
state jail felony under Section 37.10, Penal Code." | ||
SECTION 1.04. Section 403.302, Government Code, is amended | ||
by adding Subsection (b-1) to read as follows: | ||
(b-1) The comptroller shall exclude from the samples used to | ||
conduct the study tangible personal property a person owns that is | ||
held or used for the production of income and is the subject of a | ||
rendition statement or property report filed by the person as | ||
authorized by Section 22.01(j-3), Tax Code. | ||
SECTION 1.05. This article applies only to ad valorem taxes | ||
imposed for a tax year that begins on or after the effective date of | ||
this article. | ||
SECTION 1.06. This article takes effect January 1, 2024, | ||
but only if the constitutional amendment proposed by the 88th | ||
Legislature, Regular Session, 2023, to authorize the legislature to | ||
exempt from ad valorem taxation a portion of the market value of | ||
tangible personal property that is held or used for the production | ||
of income is approved by the voters. If that amendment is not | ||
approved by the voters, this article has no effect. | ||
ARTICLE 2. FRANCHISE TAX CREDIT FOR INVENTORY AD VALOREM TAX | ||
LIABILITY | ||
SECTION 2.01. Chapter 171, Tax Code, is amended by adding | ||
Subchapter N to read as follows: | ||
SUBCHAPTER N. TAX CREDIT FOR INVENTORY TAX LIABILITY | ||
Sec. 171.701. DEFINITION. In this subchapter, "inventory" | ||
means: | ||
(1) a finished good held for sale, resale, lease, or | ||
rental, including: | ||
(A) a dealer's motor vehicle inventory, as | ||
defined by Section 23.121; | ||
(B) a dealer's vessel and outboard motor | ||
inventory, as defined by Section 23.124; | ||
(C) a dealer's heavy equipment inventory, as | ||
defined by Section 23.1241; or | ||
(D) retail manufactured housing inventory, as | ||
defined by Section 23.127; or | ||
(2) a raw or finished material held to be incorporated | ||
into or attached to tangible personal property to create a finished | ||
good. | ||
Sec. 171.702. ELIGIBILITY FOR CREDIT. A taxable entity is | ||
entitled to apply for a credit against the tax imposed under this | ||
chapter in the amount and under the conditions provided by this | ||
subchapter. | ||
Sec. 171.703. AMOUNT OF CREDIT; LIMITATIONS. (a) Subject | ||
to Subsections (b) and (c), the amount of a taxable entity's credit | ||
for a report is equal to the lesser of: | ||
(1) the total franchise tax due for the report after | ||
applying all other applicable credits; or | ||
(2) 20 percent of the aggregate amount of ad valorem | ||
taxes imposed by each taxing unit during the ad valorem tax year | ||
preceding the year in which the report is originally due on property | ||
owned by the taxable entity that were derived from the taxable value | ||
of inventory owned by the taxable entity and located in this state. | ||
(b) The total amount of credits that may be awarded under | ||
this subchapter for a calendar year may not exceed $525 million. | ||
(c) The comptroller by rule shall prescribe procedures by | ||
which the comptroller will allocate credits under this subchapter. | ||
The procedures must provide that if the total amount of credits for | ||
which taxable entities apply under Subsection (a) exceeds the limit | ||
under Subsection (b) for a calendar year, the comptroller shall: | ||
(1) for each taxable entity that applied for the | ||
credit, reduce the amount under Subsection (a)(2) to a pro rata | ||
share of $525 million based on the amount of ad valorem taxes | ||
described by Subsection (a)(2) imposed on property of the taxable | ||
entity and on property of all taxable entities that applied for the | ||
credit; | ||
(2) after making the reductions under Subdivision (1), | ||
determine the amount by which each taxable entity's pro rata share | ||
under Subdivision (1) exceeds the amount provided by Subsection | ||
(a)(1) for the taxable entity, if any, and the sum of those amounts | ||
for all taxable entities; and | ||
(3) allocate the sum determined under Subdivision (2) | ||
to other taxable entities that applied for the credit on a pro rata | ||
basis to partly or wholly restore the amount reduced under | ||
Subdivision (1). | ||
(d) For purposes of calculating the aggregate amount of ad | ||
valorem taxes imposed on property owned by the taxable entity that | ||
were derived from the taxable value of inventory under Subsection | ||
(a)(2), a taxable entity may consider the amount of an exemption to | ||
which the taxable entity is entitled under Section 11.145 to apply | ||
to tangible personal property other than inventory owned by the | ||
taxable entity before applying the exemption to inventory owned by | ||
the taxable entity. | ||
(e) For purposes of calculating the amount of the credit | ||
under this subchapter in connection with the 2023 ad valorem tax | ||
year, a taxable entity may make a good faith estimate of the portion | ||
of the ad valorem taxes imposed on the taxable entity's property | ||
that were derived from inventory owned by the taxable entity and | ||
located in this state. For purposes of this subsection, "good | ||
faith" means honesty in fact and intention and requires the absence | ||
of an intent to mislead or deceive. This subsection expires January | ||
1, 2026. | ||
Sec. 171.704. APPLICATION FOR CREDIT. (a) A taxable entity | ||
must apply for the credit under this subchapter on or with the | ||
originally filed report for the period for which the credit is | ||
claimed. | ||
(b) The comptroller shall prescribe the form and method for | ||
applying for a credit under this subchapter. A taxable entity must | ||
use the form in applying for the credit and submit the form with the | ||
report for the period for which the credit is claimed using the | ||
comptroller's Internet website. | ||
(c) The comptroller may require the taxable entity to | ||
include any other information the comptroller determines is | ||
necessary to demonstrate: | ||
(1) whether the entity is eligible for the credit; and | ||
(2) the amount of the credit. | ||
(d) The burden of establishing eligibility for and the | ||
amount of the credit is on the taxable entity. | ||
(e) The comptroller may request permission to examine the | ||
books and records of a taxable entity as necessary to determine | ||
whether the entity is entitled to a credit under this subchapter and | ||
the amount of the credit. The comptroller may disallow the credit | ||
if the taxable entity refuses to allow the comptroller to examine | ||
the books and records. | ||
Sec. 171.705. ADMINISTRATION OF CREDIT; REFUND. The | ||
comptroller may require a taxable entity that applies for a credit | ||
under this subchapter to submit with the report a payment for all or | ||
part of the taxes to which the credit applies. As soon as | ||
practicable after determining the amount of the credit under | ||
Section 171.703, the comptroller shall issue a warrant for any | ||
portion of the credit for which payment was made. | ||
Sec. 171.706. SALE, ASSIGNMENT, OR CARRYFORWARD | ||
PROHIBITED. A taxable entity that receives a credit under this | ||
subchapter may not sell, assign, or carry forward any part of the | ||
credit. | ||
Sec. 171.707. RULES. The comptroller shall adopt rules as | ||
necessary to implement and administer this subchapter. | ||
SECTION 2.02. Subchapter N, Chapter 171, Tax Code, as added | ||
by this article, applies only to a report originally due on or after | ||
the effective date of this article. | ||
SECTION 2.03. This article takes effect January 1, 2024. | ||
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