Bill Text: TX SB871 | 2023-2024 | 88th Legislature | Introduced

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Bill Title: Relating to the exemption of inventory from ad valorem taxation.

Spectrum: Partisan Bill (Republican 1-0)

Status: (Introduced - Dead) 2023-03-01 - Referred to Local Government [SB871 Detail]

Download: Texas-2023-SB871-Introduced.html

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88R10543 TJB-D
By: Springer S.B. No. 871

A BILL TO BE ENTITLED
AN ACT
relating to the exemption of inventory from ad valorem taxation.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 93.001(2), Business & Commerce Code, is
amended to read as follows:
(2) "Heavy equipment" means self-propelled,
self-powered, or pull-type equipment, including farm equipment or a
diesel engine, that weighs at least 1,500 pounds and is intended to
be used for agricultural, construction, industrial, maritime,
mining, or forestry uses. The term does not include a motor
vehicle that is required by:
(A) Chapter 501, Transportation Code, to be
titled; or
(B) Chapter 502, Transportation Code, to be
registered [has the meaning assigned by Section 23.1241, Tax Code].
SECTION 2. Section 6.24(b), Tax Code, is amended to read as
follows:
(b) The commissioners court with the approval of the county
assessor-collector may contract as provided by the Interlocal
Cooperation Act with the governing body of another taxing unit in
the county or with the board of directors of the appraisal district
for the other taxing unit or the district to perform duties relating
to the assessment or collection of taxes for the county. If a
county contracts to have its taxes assessed and collected by
another taxing unit or by the appraisal district, [except as
provided by Subsection (c),] the contract shall require the other
taxing unit or the district to assess and collect all taxes the
county is required to assess and collect.
SECTION 3. Sections 11.251(b), (c), (d), and (h), Tax Code,
are amended to read as follows:
(b) A person is entitled to an exemption from taxation by a
taxing unit of the appraised value of that portion of the person's
[inventory or] property consisting of freeport goods as determined
under this section for the taxing unit.
(c) The exemption provided by Subsection (b) is subtracted
from the market value of the [inventory or] property [determined
under Section 23.12] to determine the taxable value of the
[inventory or] property [for the taxing unit].
(d) Except as provided by Subsections (f) and (g), the chief
appraiser shall determine the appraised value of freeport goods
under this subsection. The chief appraiser shall determine the
percentage of the market value of [inventory or] property owned by
the property owner in the preceding calendar year that was
contributed by freeport goods. The chief appraiser shall apply
that percentage to the market value of the property owner's
[inventory or] property for the current year to determine the
appraised value of freeport goods for the current year.
(h) The chief appraiser by written notice delivered to a
property owner who claims an exemption under this section may
require the property owner or a person designated in writing by the
importer of record to provide copies of [inventory or] property
records in order to determine the amount and value of freeport
goods. If the property owner or designated person fails to deliver
the information requested in the notice before the 31st day after
the date the notice is delivered to the property owner or before the
date the appraisal review board approves the appraisal records
under Section 41.12, whichever is later, the property owner
forfeits the right to claim or receive the exemption for that year.
If the property owner or designated person delivers the information
requested in the notice before the date the appraisal review board
approves the appraisal records but not before the 31st day after the
date the notice is delivered to the property owner and the exemption
is allowed, the property owner is liable to each taxing unit for a
penalty in an amount equal to 10 percent of the difference between
the amount of tax imposed by the taxing unit on the [inventory or]
property and the amount that would otherwise have been imposed. The
chief appraiser shall make an entry on the appraisal records for the
[inventory or] property indicating the property owner's liability
for the penalty and shall deliver a written notice of imposition of
the penalty, explaining the reason for its imposition, to the
property owner. The assessor for a taxing unit that taxes the
[inventory or] property shall add the amount of the penalty to the
property owner's tax bill, and the tax collector for the taxing unit
shall collect the penalty at the time and in the manner the
collector collects the tax. The amount of the penalty constitutes a
lien against the [inventory or] property against which the penalty
is imposed, as if it were a tax, and accrues penalty and interest in
the same manner as a delinquent tax.
SECTION 4. Section 11.253(a)(2), Tax Code, is amended to
read as follows:
(2) "Goods-in-transit" means tangible personal
property that:
(A) is acquired in or imported into this state to
be forwarded to another location in this state or outside this
state;
(B) is stored under a contract of bailment by a
public warehouse operator at one or more public warehouse
facilities in this state that are not in any way owned or controlled
by the owner of the personal property for the account of the person
who acquired or imported the property;
(C) is transported to another location in this
state or outside this state not later than 175 days after the date
the person acquired the property in or imported the property into
this state; and
(D) does not include oil, natural gas, petroleum
products, or aircraft[, dealer's motor vehicle inventory, dealer's
vessel and outboard motor inventory, dealer's heavy equipment
inventory, or retail manufactured housing inventory].
SECTION 5. Section 11.253(c), Tax Code, is amended to read
as follows:
(c) The exemption provided by Subsection (b) is subtracted
from the market value of the property [determined under Section
23.01 or 23.12, as applicable,] to determine the taxable value of
the property.
SECTION 6. Subchapter B, Chapter 11, Tax Code, is amended by
adding Section 11.36 to read as follows:
Sec. 11.36. INVENTORY. (a) In this section, "inventory"
means:
(1) a finished good held for sale or resale;
(2) a raw or finished material held to be incorporated
into or attached to tangible personal property to create a finished
good; or
(3) residential real property that has never been
occupied as a residence and is held for sale in the ordinary course
of a trade or business, provided that the residential real property
remains unoccupied, is not leased or rented, and produces no
income.
(b) A person is entitled to an exemption from taxation by a
taxing unit of inventory owned by the person.
SECTION 7. Sections 11.4391(b), (c), and (d), Tax Code, are
amended to read as follows:
(b) If the application is approved, the property owner is
liable to each taxing unit for a penalty in an amount equal to 10
percent of the difference between the amount of tax imposed by the
taxing unit on the [inventory or] property, a portion of which
consists of freeport goods, and the amount that would otherwise
have been imposed.
(c) The chief appraiser shall make an entry on the appraisal
records for the [inventory or] property indicating the property
owner's liability for the penalty and shall deliver a written
notice of imposition of the penalty, explaining the reason for its
imposition, to the property owner.
(d) The tax assessor for a taxing unit that taxes the
[inventory or] property shall add the amount of the penalty to the
property owner's tax bill, and the tax collector for the taxing unit
shall collect the penalty at the time and in the manner the
collector collects the tax. The amount of the penalty constitutes a
lien against the [inventory or] property against which the penalty
is imposed, as if it were a tax, and accrues penalty and interest in
the same manner as a delinquent tax.
SECTION 8. Sections 22.01(a) and (g), Tax Code, are amended
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 location or taxable situs of the
property; and
(4) [(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.
(g) A person's good faith estimate of the market value of
the property under Subsection (a)(4) [(a)(5)] is solely for the
purpose of compliance with the requirement to render tangible
personal property and is inadmissible in any subsequent protest,
hearing, appeal, suit, or other proceeding under this title
involving the property, except for:
(1) a proceeding to determine whether the person
complied with this section;
(2) a proceeding under Section 22.29(b); or
(3) a protest under Section 41.41.
SECTION 9. Section 22.04(d), Tax Code, is amended to read as
follows:
(d) This section does not apply to a motor vehicle that on
January 1 is located at a place of business of a person who holds a
wholesale motor vehicle auction general distinguishing number
issued by the Texas Department of Motor Vehicles under Chapter 503,
Transportation Code, for that place of business, and that:
(1) has not acquired taxable situs under Section
21.02(a)(1) in a taxing unit that participates in the appraisal
district because the vehicle is described by Section 21.02(d);
(2) is offered for sale by a dealer who holds a
dealer's general distinguishing number issued by the Texas
Department of Motor Vehicles under Chapter 503, Transportation
Code[, and whose inventory of motor vehicles is subject to taxation
in the manner provided by Sections 23.121 and 23.122]; or
(3) is collateral possessed by a lienholder and
offered for sale in foreclosure of a security interest.
SECTION 10. Section 22.07(c), Tax Code, is amended to read
as follows:
(c) The chief appraiser may request, either in writing or by
electronic means, that the property owner provide a statement
containing supporting information indicating how the value
rendered under Section 22.01(a)(4) [22.01(a)(5)] was
determined. The statement must:
(1) summarize information sufficient to identify the
property, including:
(A) the physical and economic characteristics
relevant to the opinion of value, if appropriate; and
(B) the source of the information used;
(2) state the effective date of the opinion of value;
and
(3) explain the basis of the value rendered, which may
be the depreciation schedules used for federal income tax purposes
if [. If] the property owner is a business with 50 employees or
less[, the property owner may base the estimate of value on the
depreciation schedules used for federal income tax purposes].
SECTION 11. Sections 23.20(a), (b), and (c), Tax Code, are
amended to read as follows:
(a) A property owner [An owner of inventory or real
property] may in writing waive the right to special appraisal
provided by [Section 23.12 or] Subchapter C, D, E, F, or G as to one
or more taxing units designated in the waiver. In a tax year in
which a waiver is in effect, the property is appraised for each
taxing unit to which the waiver applies at the value determined
under Subchapter A of this chapter or the value determined under
[Section 23.12 or] Subchapter C, D, E, F, or G, whichever is the
greater value.
(b) [A waiver of the right to special appraisal provided by
Section 23.12 may be submitted at any time.] A waiver of the right
to special appraisal provided by Subchapter C, D, E, F, or G may be
submitted with an application for appraisal under that subchapter
or at any other time. A property owner who has waived special
appraisal under this section as to one or more taxing units may make
additional waivers under this section as to other taxing units in
which the property is located.
(c) A waiver under this section is effective for 25
consecutive tax years beginning on the first tax year in which the
waiver is effective without regard to whether the property is
subject to appraisal under [Section 23.12 or] Subchapter C, D, E, F,
or G. To be effective in the year in which the waiver is executed, it
must be filed before May 1 of that year with the chief appraiser of
the appraisal district in which the property is located, unless for
good cause shown the chief appraiser extends the filing deadline
for not more than 60 days. An application filed after the year's
deadline takes effect in the next tax year.
SECTION 12. The heading to Section 31.081, Tax Code, is
amended to read as follows:
Sec. 31.081. PROPERTY TAX WITHHOLDING ON PURCHASE OF
BUSINESS [OR INVENTORY].
SECTION 13. Sections 31.081(a), (f), and (g), Tax Code, are
amended to read as follows:
(a) This section applies only to a person who purchases a
business or [,] an interest in a business[, or the inventory of a
business] from a person who is liable under this title for the
payment of taxes imposed on personal property used in the operation
of that business.
(f) This section does not release a person who sells a
business [or the inventory of a business] from any personal
liability imposed on the person for the payment of taxes imposed on
the personal property of the business or for penalties or interest
on those taxes.
(g) For purposes of this section, [:
[(1)] a person is considered to have purchased a
business if the person purchases the name of the business or the
goodwill associated with the business[; and
[(2) a person is considered to have purchased the
inventory of a business if the person purchases inventory of a
business, the value of which is at least 50 percent of the value of
the total inventory of the business on the date of the purchase].
SECTION 14. Section 32.01(b), Tax Code, is amended to read
as follows:
(b) A tax lien on [inventory,] furniture, equipment, or
other personal property is a lien in solido and attaches to all
[inventory,] furniture, equipment, and other personal property
that the property owner owns on January 1 of the year the lien
attaches or that the property owner subsequently acquires.
SECTION 15. Section 41.44(a), Tax Code, is amended to read
as follows:
(a) Except as provided by Subsections (b), (c), (c-1), and
(c-2), to be entitled to a hearing and determination of a protest,
the property owner initiating the protest must file a written
notice of the protest with the appraisal review board having
authority to hear the matter protested:
(1) not later than May 15 or the 30th day after the
date that notice to the property owner was delivered to the property
owner as provided by Section 25.19, whichever is later;
(2) in the case of a protest of a change in the
appraisal records ordered as provided by Subchapter A of this
chapter or by Chapter 25, not later than the 30th day after the date
notice of the change is delivered to the property owner;
(3) in the case of a determination that a change in the
use of land appraised under Subchapter C, D, E, or H, Chapter 23,
has occurred, not later than the 30th day after the date the notice
of the determination is delivered to the property owner; or
(4) [in the case of a determination of eligibility for
a refund under Section 23.1243, not later than the 30th day after
the date the notice of the determination is delivered to the
property owner; or
[(5)] in the case of a protest of the modification or
denial of an application for an exemption under Section 11.35, or
the determination of an appropriate damage assessment rating for an
item of qualified property under that section, not later than the
30th day after the date the property owner receives the notice
required under Section 11.45(e).
SECTION 16. Sections 42.01(a) and (c), Tax Code, are
amended to read as follows:
(a) A property owner is entitled to appeal:
(1) an order of the appraisal review board
determining:
(A) a protest by the property owner as provided
by Subchapter C of Chapter 41;
(B) a motion filed under Section 25.25;
(C) that the property owner has forfeited the
right to a final determination of a motion filed under Section 25.25
or of a protest under Section 41.411 for failing to comply with the
prepayment requirements of Section 25.26 or 41.4115, as applicable;
or
(D) [eligibility for a refund requested under
Section 23.1243; or
[(E)] that the appraisal review board lacks
jurisdiction to finally determine a protest by the property owner
under Subchapter C, Chapter 41, or a motion filed by the property
owner under Section 25.25 because the property owner failed to
comply with a requirement of Subchapter C, Chapter 41, or Section
25.25, as applicable; or
(2) an order of the comptroller issued as provided by
Subchapter B, Chapter 24, apportioning among the counties the
appraised value of railroad rolling stock owned by the property
owner.
(c) A property owner who establishes that the appraisal
review board had jurisdiction to issue a final determination of the
protest by the property owner under Subchapter C, Chapter 41, or of
the motion filed by the property owner under Section 25.25 in an
appeal under Subsection (a)(1)(D) [(a)(1)(E)] of this section is
entitled to a final determination by the court of the protest under
Subchapter C, Chapter 41, or of the motion filed under Section
25.25. A final determination of a protest under Subchapter C,
Chapter 41, by the court under this subsection may be on any ground
of protest authorized by this title applicable to the property that
is the subject of the protest, regardless of whether the property
owner included the ground in the property owner's notice of
protest.
SECTION 17. Sections 312.204(a) and (g), Tax Code, are
amended to read as follows:
(a) The governing body of a municipality eligible to enter
into tax abatement agreements under Section 312.002 may agree in
writing with the owner of taxable real property that is located in a
reinvestment zone, but that is not in an improvement project
financed by tax increment bonds, to exempt from taxation a portion
of the value of the real property or of tangible personal property
located on the real property, or both, for a period not to exceed 10
years, on the condition that the owner of the property make specific
improvements or repairs to the property. The governing body of an
eligible municipality may agree in writing with the owner of a
leasehold interest in tax-exempt real property that is located in a
reinvestment zone, but that is not in an improvement project
financed by tax increment bonds, to exempt a portion of the value of
property subject to ad valorem taxation, including the leasehold
interest, improvements, or tangible personal property located on
the real property, for a period not to exceed 10 years, on the
condition that the owner of the leasehold interest make specific
improvements or repairs to the real property. A tax abatement
agreement under this section is subject to the rights of holders of
outstanding bonds of the municipality. An agreement exempting
taxable real property or leasehold interests or improvements on
tax-exempt real property may provide for the exemption of such
taxable interests in each year covered by the agreement only to the
extent its value for that year exceeds its value for the year in
which the agreement is executed. An agreement exempting tangible
personal property located on taxable or tax-exempt real property
may provide for the exemption of tangible personal property located
on the real property in each year covered by the agreement other
than tangible personal property that was located on the real
property at any time before the period covered by the agreement with
the municipality, including [inventory and] supplies. In a
municipality that has a comprehensive zoning ordinance, an
improvement, repair, development, or redevelopment taking place
under an agreement under this section must conform to the
comprehensive zoning ordinance.
(g) Notwithstanding the other provisions of this chapter,
the governing body of a municipality eligible to enter into tax
abatement agreements under Section 312.002 may agree in writing
with the owner of real property that is located in a reinvestment
zone to exempt from taxation for a period not to exceed five years a
portion of the value of the real property or of tangible personal
property located on the real property, or both, that is used to
provide housing for military personnel employed at a military
facility located in or near the municipality. An agreement may
provide for the exemption of the real property in each year covered
by the agreement only to the extent its value for that year exceeds
its value for the year in which the agreement is executed. An
agreement may provide for the exemption of tangible personal
property located on the real property in each year covered by the
agreement other than tangible personal property that was located on
the real property at any time before the period covered by the
agreement with the municipality and other than [inventory or]
supplies. The governing body of the municipality may adopt
guidelines and criteria for tax abatement agreements entered into
under this subsection that are different from the guidelines and
criteria that apply to tax abatement agreements entered into under
another provision of this section. Tax abatement agreements
entered into under this subsection are not required to contain
identical terms for the portion of the value of the property that is
to be exempt or for the duration of the exemption as tax abatement
agreements entered into with the owners of property in the
reinvestment zone under another provision of this section.
SECTION 18. Section 503.038(a), Transportation Code, is
amended to read as follows:
(a) The department may cancel a dealer's general
distinguishing number if the dealer:
(1) falsifies or forges a title document, including an
affidavit making application for a certified copy of a title;
(2) files a false or forged tax document, including a
sales tax affidavit;
(3) fails to take assignment of any basic evidence of
ownership, including a certificate of title or manufacturer's
certificate, for a vehicle the dealer acquires;
(4) fails to assign any basic evidence of ownership,
including a certificate of title or manufacturer's certificate, for
a vehicle the dealer sells;
(5) uses or permits the use of a metal dealer's license
plate or a dealer's temporary tag on a vehicle that the dealer does
not own or control or that is not in stock and offered for sale;
(6) makes a material misrepresentation in an
application or other information filed with the department;
(7) fails to maintain the qualifications for a general
distinguishing number;
(8) fails to provide to the department within 30 days
after the date of demand by the department satisfactory and
reasonable evidence that the person is regularly and actively
engaged in business as a wholesale or retail dealer;
(9) has been licensed for at least 12 months and has
not assigned at least five vehicles during the previous 12-month
period;
(10) [has failed to demonstrate compliance with
Sections 23.12, 23.121, and 23.122, Tax Code;
[(11)] uses or allows the use of the dealer's general
distinguishing number or the location for which the general
distinguishing number is issued to avoid the requirements of this
chapter;
(11) [(12)] misuses or allows the misuse of a
temporary tag authorized under this chapter;
(12) [(13)] refuses to show on a buyer's temporary tag
the date of sale or other reasonable information required by the
department; or
(13) [(14)] otherwise violates this chapter or a rule
adopted under this chapter.
SECTION 19. The following provisions of the Tax Code are
repealed:
(1) Section 6.24(c);
(2) Section 11.253(a)(1);
(3) Section 23.12;
(4) Section 23.121;
(5) Section 23.1211;
(6) Section 23.122;
(7) Section 23.123;
(8) Section 23.124;
(9) Section 23.1241;
(10) Section 23.1242;
(11) Section 23.1243;
(12) Section 23.125;
(13) Section 23.126;
(14) Section 23.127;
(15) Section 23.128;
(16) Section 23.129; and
(17) Section 41.47(c-1).
SECTION 20. (a) This Act applies only to a tax year that
begins on or after the effective date of this Act.
(b) Sections 23.121, 23.122, 23.123, 23.124, 23.125,
23.126, 23.127, and 23.128, Tax Code, as repealed by this Act, apply
only to an offense committed before the effective date of this Act.
An offense committed before the effective date of this Act is
governed by the law in effect on the date the offense was committed,
and the former law is continued in effect for that purpose. For
purposes of this subsection, an offense was committed before the
effective date of this Act if any element of the offense occurred
before that date.
(c) Notwithstanding the changes in law made by this Act to
the provisions of the Business & Commerce Code, Tax Code, and
Transportation Code amended by this Act and the repeal by this Act
of provisions of the Tax Code, each of those provisions, as it
existed immediately before January 1, 2024, is continued in effect
for the purpose of the levy and collection of an ad valorem tax on
inventory imposed before January 1, 2024.
SECTION 21. This Act takes effect January 1, 2024, but only
if the constitutional amendment proposed by the 88th Legislature,
Regular Session, 2023, authorizing the legislature to exempt from
ad valorem taxation a person's inventory is approved by the voters.
If that amendment is not approved by the voters, this Act has no
effect.