86R490 CJC-D
By: Hughes S.B. No. 1143
A BILL TO BE ENTITLED
AN ACT
relating to the appraisal for ad valorem tax purposes of tangible
personal property held for sale at retail and a franchise tax credit
based on the ad valorem taxes paid on such property.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Sections 23.12(a) and (f), Tax Code, are amended
to read as follows:
(a) Except as provided by Sections 23.121, [23.1241,]
23.124, 23.1241, 23.1244, and 23.127, the market value of an
inventory is the price for which it would sell as a unit to a
purchaser who would continue the business. An inventory shall
include residential real property which 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.
(f) The owner of an inventory other than a dealer's motor
vehicle inventory as that term is defined by Section 23.121, [a
dealer's heavy equipment inventory as that term is defined by
Section 23.1241, or] a dealer's vessel and outboard motor inventory
as that term is defined by Section 23.124, a dealer's heavy
equipment inventory as that term is defined by Section 23.1241, a
retail inventory as that term is defined by Section 23.1244, or a
retail manufactured housing inventory as that term is defined by
Section 23.127 may elect to have the inventory appraised at its
market value as of September 1 of the year preceding the tax year to
which the appraisal applies by filing an application with the chief
appraiser requesting that the inventory be appraised as of
September 1. The application must clearly describe the inventory
to which it applies and be signed by the owner of the inventory. The
application applies to the appraisal of the inventory in each tax
year that begins after the next August 1 following the date the
application is filed with the chief appraiser unless the owner of
the inventory by written notice filed with the chief appraiser
revokes the application or the ownership of the inventory changes.
A notice revoking the application is effective for each tax year
that begins after the next September following the date the notice
of revocation is filed with the chief appraiser.
SECTION 2. Subchapter B, Chapter 23, Tax Code, is amended by
adding Section 23.1244 to read as follows:
Sec. 23.1244. RETAILER'S RETAIL INVENTORY; VALUE. (a) In
this section:
(1) "Chief appraiser" means the chief appraiser for
the appraisal district in which a retailer's retail inventory is
located.
(2) "Declaration" means a retailer's retail inventory
declaration form adopted by the comptroller under this section.
(3) "Retail inventory" means all tangible personal
property that a retailer holds for sale in this state during a
12-month period and for which the retailer is not otherwise
entitled to an exemption from taxation. For purposes of this
section, the term does not include:
(A) real property; or
(B) inventory that qualifies for appraisal under
Section 23.121, 23.124, 23.1241, or 23.127.
(4) "Retailer" means a person who is engaged in the
business in this state of selling retail inventory. For purposes of
this section, the term does not include a bank, savings bank,
savings and loan association, credit union, or other finance
company.
(5) "Sales price" means the total amount of money paid
or to be paid to a retailer for the purchase of an item of retail
inventory.
(6) "Total annual sales" means the total of the sales
price from every sale from a retailer's retail inventory for a
12-month period.
(b) For the purpose of the computation of property tax, the
chief appraiser shall determine the market value of a retailer's
retail inventory on January 1 to be the average of the following
amounts:
(1) the market value of the retail inventory on that
date as determined under Section 23.12; and
(2) the retailer's total annual sales, less sales at
wholesale and sales to other retailers, for the 12-month period
corresponding to the preceding tax year, divided by 12.
(c) For the purpose of the computation of property tax on
the market value of the retail inventory of an owner who was not a
retailer on January 1 of the preceding tax year, the chief appraiser
shall estimate the amount described by Subsection (b)(2). In
making the estimate required by this subsection, the chief
appraiser shall use sales data, if available, generated by sales
from the retailer's retail inventory in the preceding tax year.
(d) Except for retail inventory, tangible personal property
held by a retailer is appraised as provided by the other sections of
this code. In the case of a retailer whose sales from the
retailer's retail inventory are made predominately to other
retailers, the chief appraiser shall appraise the retailer's retail
inventory as provided by Section 23.12.
(e) A retailer is presumed to be an owner of retail
inventory on January 1 if, in the 12-month period ending on December
31 of the preceding year, the retailer sold an item of retail
inventory to a person other than a retailer. The presumption is
not rebutted by the fact that a retailer has no item of retail
inventory physically on hand for sale from the retailer's retail
inventory on January 1.
(f) The comptroller by rule shall adopt a retailer's retail
inventory declaration form. Not later than April 15 of each year,
or, in the case of a retailer who was not in business on January 1,
not later than 30 days after commencement of business, each
retailer shall file a declaration with the chief appraiser for each
location at which the retailer's retail inventory to be appraised
as provided by this section is located. The declaration is in
addition to the rendition statement or property report filed by the
retailer when rendering the retailer's retail inventory under
Chapter 22. The declaration is sufficient to comply with this
subsection if it sets forth:
(1) the name and business address of each location at
which the retailer's retail inventory to be appraised as provided
by this section is located;
(2) a statement that the retailer is the owner of
retail inventory; and
(3) the retailer's total annual sales, less sales at
wholesale and sales to other retailers, for the 12-month period
corresponding to the preceding tax year.
(g) As provided by this subsection, the chief appraiser may
examine the books and records of a retailer. A request made under
this subsection must be made in writing, be delivered personally to
the custodian of the records at a location at which the retailer
conducts business, provide a period of not less than 15 days for the
person to respond to the request, and state that the person to whom
the request is addressed has the right to seek judicial relief from
compliance with the request. In a request made under this section,
the chief appraiser may examine:
(1) documentation appropriate to allow the chief
appraiser to ascertain the applicability of this section to the
person; and
(2) sales records to substantiate information set
forth in the declaration filed by the retailer.
(h) A retailer who fails to timely file a declaration under
Subsection (f) in a tax year waives any right to have the retailer's
retail inventory appraised as provided by this section in that tax
year, and the chief appraiser shall appraise the retailer's retail
inventory as provided by Section 23.12.
(i) Section 23.123 applies to a declaration filed under this
section in the same manner in which that section applies to a
declaration filed as required by Section 23.121.
SECTION 3. Chapter 171, Tax Code, is amended by adding
Subchapter N to read as follows:
SUBCHAPTER N. TAX CREDIT FOR BUSINESS AD VALOREM TAX PAYMENTS ON
INVENTORY
Sec. 171.701. DEFINITIONS. In this subchapter:
(1) "Qualified entity" means a taxable entity that:
(A) is a retailer; and
(B) pays ad valorem taxes on retail inventory
owned by the entity and located in this state.
(2) "Retail inventory" and "retailer" have the
meanings assigned by Section 23.1244.
Sec. 171.702. ELIGIBILITY FOR CREDIT. A qualified entity
is eligible to apply for a credit in the amount and under the
conditions and limitations provided by this subchapter against the
tax imposed under this chapter.
Sec. 171.703. AMOUNT OF CREDIT; LIMITATIONS. (a) Subject
to Subsection (b), the total amount of the credit under this
subchapter is equal to the difference between the following
amounts:
(1) the amount of the ad valorem taxes paid by the
qualified entity during the period on which a report is based that
are derived from the taxable value of the entity's retail
inventory; and
(2) the amount of the ad valorem taxes the entity would
have paid during the period described by Subdivision (1) on the
taxable value of the entity's retail inventory if the taxable value
of that inventory were the amount determined under Section
23.1244(b)(2).
(b) A qualified entity is not eligible for a credit under
this subchapter for a year in which the amount described by
Subsection (a)(2) is greater than the amount described by
Subsection (a)(1).
(c) The total credit claimed for a report, including the
amount of any carryforward under Section 171.704, may not exceed
the amount of franchise tax due for the report after all other
applicable tax credits.
Sec. 171.704. CARRYFORWARD. (a) If a qualified entity is
eligible for a credit that exceeds the limitation under Section
171.703(c), the entity may carry the unused credit forward for not
more than three consecutive reports.
(b) A carryforward is considered the remaining portion of a
credit that cannot be claimed in the current year because of the
limitation under Section 171.703(c). A carryforward is added to
the next year's installment of the credit in determining the
limitation for that year. A credit carryforward from a previous
report is considered to be used before the current year
installment.
Sec. 171.705. APPLICATION FOR CREDIT. (a) A qualified
entity must apply for a credit under this subchapter on or with the
report for the period for which the credit is claimed.
(b) A qualified entity shall file with a report on which the
credit is claimed any information required by the comptroller to
sufficiently demonstrate that the entity is eligible for the
credit.
(c) The burden of establishing eligibility for and the value
of the credit is on the qualified entity.
Sec. 171.706. SALE OR ASSIGNMENT OF CREDIT. (a) A
qualified entity that earns a credit under this subchapter may sell
or assign all or part of the credit, and any entity to which all or
part of the credit is sold or assigned may sell or assign all or part
of the credit to another entity. There is no limit on the total
number of transactions for the sale or assignment of all or part of
the total credit authorized under this subchapter, however,
collectively all transferred and retained credits claimed for a
period are subject to the limitation under Section 171.703(c).
(b) An entity that sells or assigns a credit under this
section and the entity to which the credit is sold or assigned shall
jointly submit written notice of the sale or assignment to the
comptroller on a form promulgated by the comptroller not later than
the 30th day after the date of the sale or assignment. The notice
must include:
(1) the date of the sale or assignment;
(2) the amount of the credit sold or assigned;
(3) the names and federal tax identification numbers
of the entity that sold or assigned the credit or part of the credit
and the entity to which the credit or part of the credit was sold or
assigned; and
(4) the amount of the credit owned by the selling or
assigning entity before the sale or assignment, and the amount the
selling or assigning entity retained, if any, after the sale or
assignment.
(c) The sale or assignment of a credit in accordance with
this section does not extend the period for which a credit may be
carried forward and does not increase the total amount of the credit
that may be claimed.
Sec. 171.707. RULES. The comptroller shall adopt rules
necessary to implement this subchapter.
SECTION 4. The legislature finds that, because of the many
different types of retail inventory and the differences in the
period of time that items comprising different types of retail
inventory are held for sale by retailers before being sold to
purchasers, it is difficult to establish a method that reliably
determines the market value of such inventory. Accordingly, the
legislature has enacted Section 23.1244, Tax Code, to specify a
fair and accurate method for determining the appraised value of
retail inventory that recognizes the unique characteristics of
different types of retail inventory that may affect its value.
SECTION 5. Section 23.1244, Tax Code, as added by this Act,
applies only to an ad valorem tax year that begins on or after the
effective date of this Act.
SECTION 6. Subchapter N, Chapter 171, Tax Code, as added by
this Act, applies only to a report originally due on or after
January 1, 2021.
SECTION 7. This Act takes effect January 1, 2020.