87R2877 BEF/MEW/TJB-F
By: White H.B. No. 3770
A BILL TO BE ENTITLED
AN ACT
relating to the repeal of or limitations on certain state and local
taxes, including ad valorem taxes, the enactment of state and local
value added taxes, and related school finance and administration
reform; imposing taxes.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
ARTICLE 1. STATE VALUE ADDED TAX
SECTION 1.01. DEFINITIONS. In this article:
(1) "Input tax" means the aggregate amount of all
state and local value added taxes imposed under this Act that have
accrued with respect to services and property supplied to a
taxpayer during a calendar quarter and used or held for use by the
taxpayer in the ordinary course of the taxpayer's trade or
business.
(2) "Output tax" means the aggregate amount of all
state and local value added taxes imposed under this Act that have
accrued with respect to services and property supplied by a
taxpayer during a calendar quarter in the ordinary course of the
taxpayer's trade or business.
(3) "Taxpayer" means a person on whom the value added
tax is imposed.
(4) "Value added tax" means the tax imposed under
Section 1.02 of this article.
SECTION 1.02. VALUE ADDED TAX IMPOSED. A value added tax is
imposed on each person in this state who supplies any service or
property in the ordinary course of a trade or business in which the
person engages for profit.
SECTION 1.03. RATE OF TAX. The rate of the value added tax
is 6.72 percent of the taxpayer's taxable receipts from the supply
of services or property.
SECTION 1.04. DETERMINATION OF TAX PAYABLE. The total
amount of state and local value added taxes under this Act payable
by a taxpayer for a calendar quarter is the amount, if any, by which
the taxpayer's output tax exceeds the taxpayer's input tax.
SECTION 1.05. EXEMPTIONS. (a) The comptroller by rule
shall exempt from the value added tax:
(1) small businesses;
(2) governmental entities; and
(3) religious, educational, and public service
organizations.
(b) The comptroller shall refund the amount of any input tax
that has been accrued by an entity exempt under Subsection (a) of
this section.
SECTION 1.06. EXCLUSIONS. The comptroller by rule shall
exclude the following services and property from the value added
tax:
(1) monetary instruments, financial assets, and
investments;
(2) intercompany services;
(3) employment services;
(4) incidental transactions;
(5) transfers of common interests in property;
(6) services and property taxed by other law,
including Chapters 201 and 202, Tax Code; and
(7) services and property this state is prohibited
from taxing by federal law or the Texas Constitution.
SECTION 1.07. RULES. The comptroller shall adopt all rules
necessary to implement, administer, and enforce the state value
added tax and all local value added taxes under this Act.
SECTION 1.08. DISPOSITION OF REVENUE. All proceeds from
the collection of the value added tax shall be deposited to the
credit of the general revenue fund.
SECTION 1.09. EFFECTIVE DATE OF ARTICLE. This article
takes effect January 1, 2026.
ARTICLE 2. LOCAL VALUE ADDED TAXES
SECTION 2.01. LOCAL SALES AND USE TAXES PROHIBITED.
Notwithstanding any other law, a political subdivision may not
impose a sales or use tax on or after the effective date of this
article.
SECTION 2.02. LOCAL VALUE ADDED TAXES. (a) A political
subdivision that was authorized to impose a sales and use tax
immediately before the effective date of this article may impose a
local value added tax on and after the effective date of this
article.
(b) A local value added tax is administered, collected, and
enforced by the comptroller in the same manner as the state value
added tax. The tax applies to the supply of services or property in
the territory of the political subdivision.
(c) The comptroller shall allocate and remit to each
appropriate taxing jurisdiction proceeds from the collection of
local value added taxes by the comptroller.
SECTION 2.03. RATES OF LOCAL VALUE ADDED TAXES. (a) The
combined rate of all local value added taxes may not exceed two
percent at any location in the territory of a political
subdivision.
(b) The maximum combined rate provided by Subsection (a) of
this section does not apply to or include a school district
enrichment value added tax under Article 3 of this Act.
(c) On the effective date of this article, a political
subdivision may begin imposing the local value added tax at a rate
not to exceed the rate at which the political subdivision imposed a
sales and use tax immediately before the effective date of this
article. Subject to Subsection (a) of this section, the governing
body of a political subdivision that imposes a local value added tax
may adopt an order or ordinance changing the rate of or repealing
the tax imposed by the political subdivision.
SECTION 2.04. EFFECTIVE DATE OF ARTICLE. This article
takes effect January 1, 2026.
ARTICLE 3. SCHOOL DISTRICT ENRICHMENT VALUE ADDED TAX
SECTION 3.01. TAX AUTHORIZED. (a) A school district may
adopt or repeal a school district enrichment value added tax at an
election in which a majority of the qualified voters of the school
district approve the adoption or repeal of the tax.
(b) A school district enrichment value added tax is
administered, collected, and enforced by the comptroller in the
same manner as the state value added tax. The tax applies to the
supply of services or property in the territory of the school
district.
SECTION 3.02. MAXIMUM RATE. The rate of the school district
enrichment value added tax may not exceed 0.5 percent.
SECTION 3.03. USE OF TAX REVENUE BY SCHOOL DISTRICT. (a)
Revenue from the school district enrichment value added tax is for
the use and benefit of the school district. The revenue must be
used exclusively for school enrichment facilities and activities
and for the payment of the principal of and interest on debt
incurred to fund school enrichment facilities and activities.
(b) Revenue from the school district enrichment value added
tax may not be used for an expenditure or investment that is:
(1) necessary to comply with the legislature's duty
under Section 1, Article VII, Texas Constitution, to provide for
the general diffusion of knowledge and an efficient system of
public schools, including by providing funding for instructional
facilities; and
(2) eligible for funding through the Foundation School
Program.
SECTION 3.04. PLEDGE OF REVENUE. A school district may
pledge a portion of the revenue from the school district enrichment
value added tax for the payment of obligations issued to pay all or
part of the cost of a school enrichment project in the school
district.
SECTION 3.05. EFFECTIVE DATE OF ARTICLE. This article
takes effect January 1, 2026.
ARTICLE 4. AD VALOREM TAXES
SECTION 4.01. PROHIBITION ON IMPOSITION OF AD VALOREM
TAXES. (a) Notwithstanding any other law, a political subdivision
may not impose an ad valorem tax for any purpose unless the
legislature by law has, on or after January 1, 2023, specifically
authorized the political subdivision to impose the tax. To the
extent of a conflict, this section controls over a conflicting
provision in a general or special law.
(b) The change in law made by this section does not affect
tax liability accruing before the effective date of this section.
(c) This section takes effect January 1, 2026, but only if
on or before that date a constitutional amendment to prohibit a
political subdivision from imposing an ad valorem tax for any
purpose unless the legislature by law has specifically authorized
the political subdivision to impose the tax is approved by the
voters. If such a constitutional amendment is not approved by the
voters on or before that date, this section has no effect.
SECTION 4.02. REPORT. (a) The comptroller shall prepare a
report that:
(1) recommends for each political subdivision
authorized to impose an ad valorem tax whether the legislature
should authorize the political subdivision to continue to impose
the tax on and after January 1, 2026; and
(2) recommends any change in constitutional or
statutory law needed to implement this Act.
(b) Not later than December 1, 2021, the comptroller shall
prepare and make available to each political subdivision that
imposes an ad valorem tax a form to be completed by the political
subdivision to assist the comptroller in making the recommendations
described by Subsection (a) of this section.
(c) Not later than February 1, 2022, each political
subdivision authorized to impose an ad valorem tax shall complete
and submit to the comptroller the form described by Subsection (b)
of this section. A political subdivision must prepare and submit
the form in the manner and format prescribed by the comptroller.
(d) On request of the comptroller, a political subdivision
shall promptly provide information for and assistance in preparing
the report under Subsection (a) of this section.
(e) Not later than December 1, 2022, the comptroller shall
submit to the governor, lieutenant governor, speaker of the house
of representatives, and members of the legislature the report
required by Subsection (a) of this section.
(f) This section expires January 1, 2023.
SECTION 4.03. EFFECTIVE DATE OF ARTICLE. Except as
otherwise provided by this article, this article takes effect
September 1, 2021.
ARTICLE 5. SCHOOL FINANCE
SECTION 5.01. FOUNDATION SCHOOL PROGRAM FUNDING. Beginning
with the 2026-2027 school year, the legislature shall appropriate
money to fund the Foundation School Program under Chapter 48,
Education Code, in an amount, excluding money collected by a school
district through the imposition of a tax, necessary to:
(1) comply with the legislature's duty under Section
1, Article VII, Texas Constitution, to provide for the general
diffusion of knowledge and an efficient system of public schools,
including by providing funding for instructional facilities;
(2) achieve the state policy under Section 48.001,
Education Code, and the purposes of the Foundation School Program
under Section 48.002, Education Code;
(3) provide the basic allotment under Section 48.051,
Education Code, in an amount of at least $6,160 per student in
average daily attendance; and
(4) provide a minimal level of revenue to provide
school districts an opportunity to pursue locally funded enrichment
programs.
SECTION 5.02. IMPOSITION OF MAINTENANCE AND OPERATIONS AND
DEBT SERVICE TAX BY SCHOOL DISTRICT PROHIBITED. (a)
Notwithstanding any other law and except as provided by Subsection
(b) of this section, a school district may not impose a tax for
maintenance and operations or debt service purposes on or after
January 1, 2026, unless specifically authorized by the legislature
as provided by SECTION 4.01 of this Act.
(b) Subsection (a) of this section does not affect the
authority of a school district to impose an enrichment value added
tax at a rate not to exceed 0.5 percent in accordance with Article 3
of this Act for the purpose of providing additional revenue to
enrich the educational opportunities of students enrolled in the
district. The revenue attributable to the tax authorized under
this subsection is in addition to any money the district receives
from the state.
(c) A reference in the Education Code, the Tax Code, or any
other law to a school district's authority to impose a maintenance
tax, a maintenance and operations tax, or a debt service tax may not
be construed in a manner inconsistent with this section.
SECTION 5.03. STATE ASSISTANCE FOR TRANSITION TO SCHOOL
DISTRICT ENRICHMENT VALUE ADDED TAX. (a) For purposes of
budgeting, funding, and debt servicing, the commissioner of
education shall assist school districts in transitioning from the
use of maintenance and operations and debt service tax revenue to
the use of state funding and enrichment value added tax revenue.
(b) Not later than March 1, 2026, each school district shall
prepare and submit to the commissioner of education a transition
report certified by the comptroller that provides for the following
10 state fiscal years estimates regarding:
(1) budgets;
(2) sources of funding;
(3) debt service;
(4) operating and capital expenditures; and
(5) public bond offerings.
(c) In the transition report prepared under Subsection (b)
of this section, a school district shall, in accordance with the
policy and purposes described by Sections 48.001 and 48.002,
Education Code, classify as "foundational" or "enrichment":
(1) each projected operating and capital expenditure
and the proportion of each current and projected debt and debt
service requirement; and
(2) the proportional amounts of current and projected
debts and debt service requirements, based on the proposed uses for
the revenue.
(d) Based on school districts' reports under Subsection (b)
of this section, the commissioner of education shall prepare and
present to the comptroller recommendations for refunding,
redeeming, or amending outstanding bonds for which school districts
pledged maintenance and operations or debt service tax revenue for
payment.
(e) Notwithstanding any other law, the commissioner of
education shall provide state funding for the payment of any bonds
classified by a school district as a "foundational" bond under
Subsection (c) of this section. A school district assumes full
financial responsibility for any bond classified as an "enrichment"
bond.
(f) The commissioner of education shall annually prepare
and provide a report to the legislature and the comptroller
regarding funding under the Foundation School Program and the
transition by school districts to imposing a value added enrichment
tax. The report must include recommendations for legislative
action to facilitate the funding transitions required under this
Act while maintaining and improving the efficiency, quality, and
results of public education in this state.
SECTION 5.04. REPORT REGARDING SCHOOL DISTRICT
REORGANIZATION. (a) As soon as practicable after the effective
date of this article, the commissioner of education shall consult
with school districts to develop recommendations regarding the
reorganization of school districts with populations of 100,000 or
more into smaller districts to promote increased community and
parental engagement. The recommendations must include provisions
for:
(1) preserving and promoting open-enrollment charter
schools that attract students from broadly dispersed geographic
areas; and
(2) organizing school districts based on geographic
proximity, shared community ties and interests, and transportation
patterns and limitations.
(b) Not later than September 1, 2025, the commissioner of
education shall provide the legislature with a report containing
the recommendations developed under Subsection (a) of this section.
SECTION 5.05. EFFECTIVE DATE OF ARTICLE. This article
takes effect September 1, 2021.
ARTICLE 6. REPEALED PROVISIONS
SECTION 6.01. TAX CODE. (a) The following provisions of
the Tax Code are repealed:
(1) Chapter 142;
(2) Subtitles E, F, G, H, I, and J, Title 2; and
(3) Subtitle C, Title 3.
(b) The repeal of a provision by this section does not
affect tax liability accruing before the effective date of this
article. That liability continues in effect as if this article had
not been enacted, and the former law is continued in effect for the
collection of taxes due and for civil and criminal enforcement of
the liability for those taxes.
SECTION 6.02. EDUCATION CODE. The following provisions of
the Education Code are repealed:
(1) Section 45.0032;
(2) Chapter 46;
(3) Sections 48.255, 48.2551, 48.2552, 48.2553,
48.256, 48.257, 48.258, 48.259, and 48.260;
(4) Sections 48.267(b) and (c);
(5) Sections 48.271 and 48.275; and
(6) Chapter 49.
SECTION 6.03. EFFECTIVE DATE OF ARTICLE. This article
takes effect January 1, 2026.