By: Parker, et al. S.B. No. 5
(In the Senate - Filed March 10, 2023; March 13, 2023, read
first time and referred to Committee on Finance; March 21, 2023,
reported adversely, with favorable Committee Substitute by the
following vote: Yeas 16, Nays 0; March 21, 2023, sent to printer.)
Click here to see the committee vote
COMMITTEE SUBSTITUTE FOR S.B. No. 5 By: Bettencourt
A BILL TO BE ENTITLED
AN ACT
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
[HAVING VALUE OF LESS THAN $2,500]. (a) In this section:
(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 [A] person is entitled to an exemption from
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 [if that property has a taxable value of less
than $2,500].
(c) [(b)] The exemption provided by Subsection (b) [(a)]
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) [(a)], all property
that has taxable situs in each separate location in the taxing unit
is aggregated to determine taxable value.
(d) A person is entitled to an exemption from 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, has taxable situs at a location in the taxing
unit, and is subject to a lease.
(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).
SECTION 1.02. Section 22.01, Tax Code, is amended by
amending Subsections (a), (c-1), and (f) and adding Subsections
(j-1), (j-2), (j-3), and (n) 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 address [location] or taxable situs
of the property; and
(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.
(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) [(2)] "Security interest" has the meaning
assigned by Section 1.201, Business & Commerce Code.
(f) Notwithstanding Subsections (a) and (b), a rendition
statement of a person who owns tangible personal property used for
the production of income located in the appraisal district that, in
the owner's opinion, has an aggregate value of less than $20,000 is
required to contain only:
(1) the name and address of the property owner;
(2) a general description of the property by type or
category; and
(3) the physical address [location] or taxable situs
of the property.
(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. Section 403.302, Government Code, is amended
by adding Subsection (b-1) to read as follows:
(b-1) The comptroller shall exclude from the samples used to
conduct the study tangible personal property a person owns that is
held or used for the production of income and is the subject of a
rendition statement or property report filed by the person as
authorized by Section 22.01(j-3), Tax Code.
SECTION 1.05. 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 1.06. 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. In this subchapter, "inventory"
means:
(1) a finished good held for sale, resale, lease, or
rental, including:
(A) a dealer's motor vehicle inventory, as
defined by Section 23.121;
(B) a dealer's vessel and outboard motor
inventory, as defined by Section 23.124;
(C) a dealer's heavy equipment inventory, as
defined by Section 23.1241; or
(D) retail manufactured housing inventory, as
defined by Section 23.127; or
(2) a raw or finished material held to be incorporated
into or attached to tangible personal property to create a finished
good.
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 a calendar year may not exceed $525 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 $525 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 calculating the aggregate amount of ad
valorem taxes imposed on property owned by the taxable entity that
were derived from the taxable value of inventory under Subsection
(a)(2), a taxable entity may consider the amount of an exemption to
which the taxable entity is entitled under Section 11.145 to apply
to tangible personal property other than inventory owned by the
taxable entity before applying the exemption to inventory owned by
the taxable entity.
(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 with the
report for the period for which the credit is claimed using the
comptroller's Internet website.
(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. 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.
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.
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