Texas 2019 - 86th Regular

Texas Senate Bill SB1143 Compare Versions

Only one version of the bill is available at this time.

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1	1	86R490 CJC-D
2	2	By: Hughes S.B. No. 1143
3	3
4	4
5	5	A BILL TO BE ENTITLED
6	6	AN ACT
7	7	relating to the appraisal for ad valorem tax purposes of tangible
8	8	personal property held for sale at retail and a franchise tax credit
9	9	based on the ad valorem taxes paid on such property.
10	10	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
11	11	SECTION 1. Sections 23.12(a) and (f), Tax Code, are amended
12	12	to read as follows:
13	13	(a) Except as provided by Sections 23.121, [23.1241,]
14	14	23.124, 23.1241, 23.1244, and 23.127, the market value of an
15	15	inventory is the price for which it would sell as a unit to a
16	16	purchaser who would continue the business. An inventory shall
17	17	include residential real property which has never been occupied as
18	18	a residence and is held for sale in the ordinary course of a trade or
19	19	business, provided that the residential real property remains
20	20	unoccupied, is not leased or rented, and produces no income.
21	21	(f) The owner of an inventory other than a dealer's motor
22	22	vehicle inventory as that term is defined by Section 23.121, [a
23	23	dealer's heavy equipment inventory as that term is defined by
24	24	Section 23.1241, or] a dealer's vessel and outboard motor inventory
25	25	as that term is defined by Section 23.124, a dealer's heavy
26	26	equipment inventory as that term is defined by Section 23.1241, a
27	27	retail inventory as that term is defined by Section 23.1244, or a
28	28	retail manufactured housing inventory as that term is defined by
29	29	Section 23.127 may elect to have the inventory appraised at its
30	30	market value as of September 1 of the year preceding the tax year to
31	31	which the appraisal applies by filing an application with the chief
32	32	appraiser requesting that the inventory be appraised as of
33	33	September 1. The application must clearly describe the inventory
34	34	to which it applies and be signed by the owner of the inventory. The
35	35	application applies to the appraisal of the inventory in each tax
36	36	year that begins after the next August 1 following the date the
37	37	application is filed with the chief appraiser unless the owner of
38	38	the inventory by written notice filed with the chief appraiser
39	39	revokes the application or the ownership of the inventory changes.
40	40	A notice revoking the application is effective for each tax year
41	41	that begins after the next September following the date the notice
42	42	of revocation is filed with the chief appraiser.
43	43	SECTION 2. Subchapter B, Chapter 23, Tax Code, is amended by
44	44	adding Section 23.1244 to read as follows:
45	45	Sec. 23.1244. RETAILER'S RETAIL INVENTORY; VALUE. (a) In
46	46	this section:
47	47	(1) "Chief appraiser" means the chief appraiser for
48	48	the appraisal district in which a retailer's retail inventory is
49	49	located.
50	50	(2) "Declaration" means a retailer's retail inventory
51	51	declaration form adopted by the comptroller under this section.
52	52	(3) "Retail inventory" means all tangible personal
53	53	property that a retailer holds for sale in this state during a
54	54	12-month period and for which the retailer is not otherwise
55	55	entitled to an exemption from taxation. For purposes of this
56	56	section, the term does not include:
57	57	(A) real property; or
58	58	(B) inventory that qualifies for appraisal under
59	59	Section 23.121, 23.124, 23.1241, or 23.127.
60	60	(4) "Retailer" means a person who is engaged in the
61	61	business in this state of selling retail inventory. For purposes of
62	62	this section, the term does not include a bank, savings bank,
63	63	savings and loan association, credit union, or other finance
64	64	company.
65	65	(5) "Sales price" means the total amount of money paid
66	66	or to be paid to a retailer for the purchase of an item of retail
67	67	inventory.
68	68	(6) "Total annual sales" means the total of the sales
69	69	price from every sale from a retailer's retail inventory for a
70	70	12-month period.
71	71	(b) For the purpose of the computation of property tax, the
72	72	chief appraiser shall determine the market value of a retailer's
73	73	retail inventory on January 1 to be the average of the following
74	74	amounts:
75	75	(1) the market value of the retail inventory on that
76	76	date as determined under Section 23.12; and
77	77	(2) the retailer's total annual sales, less sales at
78	78	wholesale and sales to other retailers, for the 12-month period
79	79	corresponding to the preceding tax year, divided by 12.
80	80	(c) For the purpose of the computation of property tax on
81	81	the market value of the retail inventory of an owner who was not a
82	82	retailer on January 1 of the preceding tax year, the chief appraiser
83	83	shall estimate the amount described by Subsection (b)(2). In
84	84	making the estimate required by this subsection, the chief
85	85	appraiser shall use sales data, if available, generated by sales
86	86	from the retailer's retail inventory in the preceding tax year.
87	87	(d) Except for retail inventory, tangible personal property
88	88	held by a retailer is appraised as provided by the other sections of
89	89	this code. In the case of a retailer whose sales from the
90	90	retailer's retail inventory are made predominately to other
91	91	retailers, the chief appraiser shall appraise the retailer's retail
92	92	inventory as provided by Section 23.12.
93	93	(e) A retailer is presumed to be an owner of retail
94	94	inventory on January 1 if, in the 12-month period ending on December
95	95	31 of the preceding year, the retailer sold an item of retail
96	96	inventory to a person other than a retailer. The presumption is
97	97	not rebutted by the fact that a retailer has no item of retail
98	98	inventory physically on hand for sale from the retailer's retail
99	99	inventory on January 1.
100	100	(f) The comptroller by rule shall adopt a retailer's retail
101	101	inventory declaration form. Not later than April 15 of each year,
102	102	or, in the case of a retailer who was not in business on January 1,
103	103	not later than 30 days after commencement of business, each
104	104	retailer shall file a declaration with the chief appraiser for each
105	105	location at which the retailer's retail inventory to be appraised
106	106	as provided by this section is located. The declaration is in
107	107	addition to the rendition statement or property report filed by the
108	108	retailer when rendering the retailer's retail inventory under
109	109	Chapter 22. The declaration is sufficient to comply with this
110	110	subsection if it sets forth:
111	111	(1) the name and business address of each location at
112	112	which the retailer's retail inventory to be appraised as provided
113	113	by this section is located;
114	114	(2) a statement that the retailer is the owner of
115	115	retail inventory; and
116	116	(3) the retailer's total annual sales, less sales at
117	117	wholesale and sales to other retailers, for the 12-month period
118	118	corresponding to the preceding tax year.
119	119	(g) As provided by this subsection, the chief appraiser may
120	120	examine the books and records of a retailer. A request made under
121	121	this subsection must be made in writing, be delivered personally to
122	122	the custodian of the records at a location at which the retailer
123	123	conducts business, provide a period of not less than 15 days for the
124	124	person to respond to the request, and state that the person to whom
125	125	the request is addressed has the right to seek judicial relief from
126	126	compliance with the request. In a request made under this section,
127	127	the chief appraiser may examine:
128	128	(1) documentation appropriate to allow the chief
129	129	appraiser to ascertain the applicability of this section to the
130	130	person; and
131	131	(2) sales records to substantiate information set
132	132	forth in the declaration filed by the retailer.
133	133	(h) A retailer who fails to timely file a declaration under
134	134	Subsection (f) in a tax year waives any right to have the retailer's
135	135	retail inventory appraised as provided by this section in that tax
136	136	year, and the chief appraiser shall appraise the retailer's retail
137	137	inventory as provided by Section 23.12.
138	138	(i) Section 23.123 applies to a declaration filed under this
139	139	section in the same manner in which that section applies to a
140	140	declaration filed as required by Section 23.121.
141	141	SECTION 3. Chapter 171, Tax Code, is amended by adding
142	142	Subchapter N to read as follows:
143	143	SUBCHAPTER N. TAX CREDIT FOR BUSINESS AD VALOREM TAX PAYMENTS ON
144	144	INVENTORY
145	145	Sec. 171.701. DEFINITIONS. In this subchapter:
146	146	(1) "Qualified entity" means a taxable entity that:
147	147	(A) is a retailer; and
148	148	(B) pays ad valorem taxes on retail inventory
149	149	owned by the entity and located in this state.
150	150	(2) "Retail inventory" and "retailer" have the
151	151	meanings assigned by Section 23.1244.
152	152	Sec. 171.702. ELIGIBILITY FOR CREDIT. A qualified entity
153	153	is eligible to apply for a credit in the amount and under the
154	154	conditions and limitations provided by this subchapter against the
155	155	tax imposed under this chapter.
156	156	Sec. 171.703. AMOUNT OF CREDIT; LIMITATIONS. (a) Subject
157	157	to Subsection (b), the total amount of the credit under this
158	158	subchapter is equal to the difference between the following
159	159	amounts:
160	160	(1) the amount of the ad valorem taxes paid by the
161	161	qualified entity during the period on which a report is based that
162	162	are derived from the taxable value of the entity's retail
163	163	inventory; and
164	164	(2) the amount of the ad valorem taxes the entity would
165	165	have paid during the period described by Subdivision (1) on the
166	166	taxable value of the entity's retail inventory if the taxable value
167	167	of that inventory were the amount determined under Section
168	168	23.1244(b)(2).
169	169	(b) A qualified entity is not eligible for a credit under
170	170	this subchapter for a year in which the amount described by
171	171	Subsection (a)(2) is greater than the amount described by
172	172	Subsection (a)(1).
173	173	(c) The total credit claimed for a report, including the
174	174	amount of any carryforward under Section 171.704, may not exceed
175	175	the amount of franchise tax due for the report after all other
176	176	applicable tax credits.
177	177	Sec. 171.704. CARRYFORWARD. (a) If a qualified entity is
178	178	eligible for a credit that exceeds the limitation under Section
179	179	171.703(c), the entity may carry the unused credit forward for not
180	180	more than three consecutive reports.
181	181	(b) A carryforward is considered the remaining portion of a
182	182	credit that cannot be claimed in the current year because of the
183	183	limitation under Section 171.703(c). A carryforward is added to
184	184	the next year's installment of the credit in determining the
185	185	limitation for that year. A credit carryforward from a previous
186	186	report is considered to be used before the current year
187	187	installment.
188	188	Sec. 171.705. APPLICATION FOR CREDIT. (a) A qualified
189	189	entity must apply for a credit under this subchapter on or with the
190	190	report for the period for which the credit is claimed.
191	191	(b) A qualified entity shall file with a report on which the
192	192	credit is claimed any information required by the comptroller to
193	193	sufficiently demonstrate that the entity is eligible for the
194	194	credit.
195	195	(c) The burden of establishing eligibility for and the value
196	196	of the credit is on the qualified entity.
197	197	Sec. 171.706. SALE OR ASSIGNMENT OF CREDIT. (a) A
198	198	qualified entity that earns a credit under this subchapter may sell
199	199	or assign all or part of the credit, and any entity to which all or
200	200	part of the credit is sold or assigned may sell or assign all or part
201	201	of the credit to another entity. There is no limit on the total
202	202	number of transactions for the sale or assignment of all or part of
203	203	the total credit authorized under this subchapter, however,
204	204	collectively all transferred and retained credits claimed for a
205	205	period are subject to the limitation under Section 171.703(c).
206	206	(b) An entity that sells or assigns a credit under this
207	207	section and the entity to which the credit is sold or assigned shall
208	208	jointly submit written notice of the sale or assignment to the
209	209	comptroller on a form promulgated by the comptroller not later than
210	210	the 30th day after the date of the sale or assignment. The notice
211	211	must include:
212	212	(1) the date of the sale or assignment;
213	213	(2) the amount of the credit sold or assigned;
214	214	(3) the names and federal tax identification numbers
215	215	of the entity that sold or assigned the credit or part of the credit
216	216	and the entity to which the credit or part of the credit was sold or
217	217	assigned; and
218	218	(4) the amount of the credit owned by the selling or
219	219	assigning entity before the sale or assignment, and the amount the
220	220	selling or assigning entity retained, if any, after the sale or
221	221	assignment.
222	222	(c) The sale or assignment of a credit in accordance with
223	223	this section does not extend the period for which a credit may be
224	224	carried forward and does not increase the total amount of the credit
225	225	that may be claimed.
226	226	Sec. 171.707. RULES. The comptroller shall adopt rules
227	227	necessary to implement this subchapter.
228	228	SECTION 4. The legislature finds that, because of the many
229	229	different types of retail inventory and the differences in the
230	230	period of time that items comprising different types of retail
231	231	inventory are held for sale by retailers before being sold to
232	232	purchasers, it is difficult to establish a method that reliably
233	233	determines the market value of such inventory. Accordingly, the
234	234	legislature has enacted Section 23.1244, Tax Code, to specify a
235	235	fair and accurate method for determining the appraised value of
236	236	retail inventory that recognizes the unique characteristics of
237	237	different types of retail inventory that may affect its value.
238	238	SECTION 5. Section 23.1244, Tax Code, as added by this Act,
239	239	applies only to an ad valorem tax year that begins on or after the
240	240	effective date of this Act.
241	241	SECTION 6. Subchapter N, Chapter 171, Tax Code, as added by
242	242	this Act, applies only to a report originally due on or after
243	243	January 1, 2021.
244	244	SECTION 7. This Act takes effect January 1, 2020.