Bill Text: TX SB5 | 2023-2024 | 88th Legislature | Engrossed
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-Engrossed.html
By: Parker, et al. | S.B. No. 5 |
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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 who leases tangible personal property is | ||
entitled to an exemption from taxation by a taxing unit of $25,000 | ||
of the total appraised value of all the tangible personal property | ||
the person owns that is held or used for the production of income | ||
and is subject to a lease, regardless of where the property is | ||
located in the taxing unit. | ||
(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). | ||
(h) When calculating an exemption to which the person is | ||
entitled under this section, a taxing unit shall apply the amount of | ||
the exemption to tangible personal property other than inventory | ||
that the person owns and is held or used for the production of | ||
income before applying the exemption to inventory owned by the | ||
person. | ||
(h-1) For purposes of Subsection (h), "inventory" has the | ||
meaning assigned by Section 171.701. | ||
SECTION 1.02. Section 22.01, Tax Code, is amended by | ||
amending Subsection (c-1), and adding Subsections (j-1), (j-2), | ||
(j-3), and (n) to read as follows: | ||
(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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by Section 1.201, Business & Commerce Code. | ||
(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. Chapter 25, Tax Code, is amended by adding | ||
Section 25.14 to read as follows: | ||
Sec. 25.14. INVENTORY AND TANGIBLE PERSONAL PROPERTY. (a) | ||
In this section, "inventory" means: | ||
(1) a finished good held for sale, resale, lease, or | ||
rental; | ||
(2) a raw or finished material held to be incorporated | ||
into or attached to tangible personal property to create a finished | ||
good; or | ||
(3) a material or supply, including fuel or a spare | ||
part, being held for future use. | ||
(b) For purposes of this section, the term "inventory" does | ||
not include: | ||
(1) a dealer's motor vehicle inventory, as defined by | ||
Section 23.121; | ||
(2) a dealer's vessel and outboard motor inventory, as | ||
defined by Section 23.124; | ||
(3) a dealer's heavy equipment inventory, as defined | ||
by Section 23.1241; or | ||
(4) retail manufactured housing inventory, as defined | ||
by Section 23.127. | ||
(c) Except as provided by Subsection (d), a person's | ||
inventory shall be listed separately from any other tangible | ||
personal property the person holds or uses for the production of | ||
income. | ||
(d) This section does not apply to tangible personal | ||
property for which a person is required to file a rendition | ||
statement under Section 22.01(j-3) but that the person is not | ||
required to render for taxation under any other provision of that | ||
section. | ||
SECTION 1.05. Section 31.01, Tax Code, is amended by | ||
amending Subsection (c) and adding Subsection (c-3) to read as | ||
follows: | ||
(c) The tax bill or a separate statement accompanying the | ||
tax bill shall: | ||
(1) identify the property subject to the tax; | ||
(2) state the appraised value, assessed value, and | ||
taxable value of the property; | ||
(3) if the property is land appraised as provided by | ||
Subchapter C, D, E, or H, Chapter 23, state the market value and the | ||
taxable value for purposes of deferred or additional taxation as | ||
provided by Section 23.46, 23.55, 23.76, or 23.9807, as applicable; | ||
(4) state the assessment ratio for the unit; | ||
(5) state the type and amount of any partial exemption | ||
applicable to the property, indicating whether it applies to | ||
appraised or assessed value; | ||
(6) state the total tax rate for the unit; | ||
(7) state the amount of tax due, the due date, and the | ||
delinquency date; | ||
(8) explain the payment option and discounts provided | ||
by Sections 31.03 and 31.05, if available to the unit's taxpayers, | ||
and state the date on which each of the discount periods provided by | ||
Section 31.05 concludes, if the discounts are available; | ||
(9) state the rates of penalty and interest imposed | ||
for delinquent payment of the tax; | ||
(10) include the name and telephone number of the | ||
assessor for the unit and, if different, of the collector for the | ||
unit; | ||
(11) for real property, state for the current tax year | ||
and each of the preceding five tax years: | ||
(A) the appraised value and taxable value of the | ||
property; | ||
(B) the total tax rate for the unit; | ||
(C) the amount of taxes imposed on the property | ||
by the unit; and | ||
(D) the difference, expressed as a percent | ||
increase or decrease, as applicable, in the amount of taxes imposed | ||
on the property by the unit compared to the amount imposed for the | ||
preceding tax year; [ |
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(12) for real property, state the differences, | ||
expressed as a percent increase or decrease, as applicable, in the | ||
following for the current tax year as compared to the fifth tax year | ||
before that tax year: | ||
(A) the appraised value and taxable value of the | ||
property; | ||
(B) the total tax rate for the unit; and | ||
(C) the amount of taxes imposed on the property | ||
by the unit; and | ||
(13) for tangible personal property, state separately | ||
the amount of taxes imposed on a person's inventory from the amount | ||
of taxes imposed on any other tangible personal property the person | ||
held or used for the production of income. | ||
(c-3) For purposes of Subsection (c), "inventory" has the | ||
meaning assigned by Section 25.14. | ||
SECTION 1.06. 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 1.07. 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. (a) In this subchapter, | ||
"inventory" means: | ||
(1) a finished good held for sale, resale, lease, or | ||
rental, including: | ||
(A) a dealer's vessel and outboard motor | ||
inventory, as defined by Section 23.124; | ||
(B) a dealer's heavy equipment inventory, as | ||
defined by Section 23.1241; or | ||
(C) retail manufactured housing inventory, as | ||
defined by Section 23.127; | ||
(2) a raw or finished material held to be incorporated | ||
into or attached to tangible personal property to create a finished | ||
good; or | ||
(3) a material or supply, including fuel or a spare | ||
part, being held for future use. | ||
(b) Notwithstanding Subsection (a) and for purposes of this | ||
subchapter, the term "inventory" does not include a dealer's motor | ||
vehicle inventory, as defined by Section 23.121. | ||
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 all reports originally due in a year may not | ||
exceed $700 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 $700 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 Subsection (a)(2), the aggregate amount | ||
of ad valorem taxes imposed on property owned by the taxable entity | ||
that were derived from the taxable value of inventory does not | ||
include, and a taxable entity is not entitled to a credit for any | ||
taxes imposed on, the taxable value of any inventory for which the | ||
taxable entity was exempt from taxation under Section 11.145. | ||
(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 | ||
electronically with the report for the period for which the credit | ||
is claimed. | ||
(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. (a) 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. | ||
(b) The amount of a warrant issued by the comptroller under | ||
Subsection (a) does not accrue interest under Section 111.064. | ||
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. |