Texas 2023 - 88th Regular

Texas Senate Bill SB5 Compare Versions

Version 1 (Old)

Version 2 (New)

Old	New		Differences
1	1		By: Parker, et al. S.B. No. 5
2	2
3	3
4	4		A BILL TO BE ENTITLED
5	5		AN ACT
6	6		relating to an exemption from ad valorem taxation of a portion of
7	7		the appraised value of tangible personal property that is held or
8	8		used for the production of income and a franchise tax credit for the
9	9		payment of certain related ad valorem taxes.
10	10		BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
11	11		ARTICLE 1. INCOME-PRODUCING TANGIBLE PERSONAL PROPERTY AD VALOREM
12	12		TAX EXEMPTION
13	13		SECTION 1.01. Section 11.145, Tax Code, is amended to read
14	14		as follows:
15	15		Sec. 11.145. INCOME-PRODUCING TANGIBLE PERSONAL PROPERTY
16	16		[HAVING VALUE OF LESS THAN $2,500]. (a) In this section:
17	17		(1) "Related business entity" means a business entity
18	18		that:
19	19		(A) engages in a common business enterprise with
20	20		at least one other business entity; and
21	21		(B) owns tangible personal property that:
22	22		(i) is held or used for the production of
23	23		income as part of the common business enterprise; and
24	24		(ii) is located at the same physical
25	25		address that tangible personal property owned by at least one other
26	26		business entity engaged in the common business enterprise is
27	27		located.
28	28		(2) "Unified business enterprise" means a common
29	29		business enterprise composed of more than one related business
30	30		entity.
31	31		(b) Subject to Subsection (f) and except as provided by
32	32		Subsection (d), a [A] person is entitled to an exemption from
33	33		taxation by a taxing unit of $25,000 of the appraised value of the
34	34		tangible personal property the person owns that is held or used for
35	35		the production of income and has taxable situs at the same location
36	36		in the taxing unit [if that property has a taxable value of less
37	37		than $2,500].
38	38		(c) [(b)] The exemption provided by Subsection (b) [(a)]
39	39		applies to each separate location in a taxing unit in which a person
40	40		holds or uses tangible personal property for the production of
41	41		income, and, for the purposes of Subsection (b) [(a)], all property
42	42		that has taxable situs in each separate location in the taxing unit
43	43		is aggregated to determine taxable value.
44	44		(d) A person who leases tangible personal property is
45	45		entitled to an exemption from taxation by a taxing unit of $25,000
46	46		of the total appraised value of all the tangible personal property
47	47		the person owns that is held or used for the production of income
48	48		and is subject to a lease, regardless of where the property is
49	49		located in the taxing unit.
50	50		(e) The exemption provided by Subsection (d) applies to each
51	51		separate taxing unit in which a person holds or uses tangible
52	52		personal property for the production of income.
53	53		(f) For the purposes of Subsection (b), if a person is a
54	54		related business entity, all property described by that subsection
55	55		that has taxable situs at the same location in a taxing unit and
56	56		that is owned by the person is aggregated with the property
57	57		described by that subsection that has taxable situs at the same
58	58		location in the taxing unit and that is owned by each other related
59	59		business enterprise that composes the same unified business
60	60		enterprise to determine taxable value for the entity.
61	61		(g) A chief appraiser may investigate a business entity to
62	62		determine whether the entity:
63	63		(1) is a related business entity; and
64	64		(2) has aggregated tangible personal property as
65	65		provided by Subsection (f).
66	66		(h) When calculating an exemption to which the person is
67	67		entitled under this section, a taxing unit shall apply the amount of
68	68		the exemption to tangible personal property other than inventory
69	69		that the person owns and is held or used for the production of
70	70		income before applying the exemption to inventory owned by the
71	71		person.
72	72		(h-1) For purposes of Subsection (h), "inventory" has the
73	73		meaning assigned by Section 171.701.
74	74		SECTION 1.02. Section 22.01, Tax Code, is amended by
75		-	amending Subsection (c-1) and adding Subsections (j-1), (j-2),
	75	+	amending Subsection (c-1), and adding Subsections (j-1), (j-2),
76	76		(j-3), and (n) to read as follows:
77	77		(c-1) In this section:
78	78		(1) "Related business entity" and "unified business
79	79		enterprise" have the meanings assigned by Section 11.145.
80	80		(2) "Secured party" has the meaning assigned by
81	81		Section 9.102, Business & Commerce Code.
82	82		(3) [(2)] "Security interest" has the meaning assigned
83	83		by Section 1.201, Business & Commerce Code.
84	84		(j-1) Notwithstanding Subsections (a) and (b), a person is
85	85		required to render tangible personal property the person owns that
86	86		is held or used for the production of income only if, in the
87	87		person's opinion and as applicable:
88	88		(1) the aggregate market value of the property that
89	89		has taxable situs in the same location in at least one taxing unit
90	90		that participates in the appraisal district is greater than the
91	91		amount exempted under Section 11.145(b); or
92	92		(2) the aggregate market value of the property in at
93	93		least one taxing unit that participates in the appraisal district
94	94		is greater than the amount exempted under Section 11.145(d).
95	95		(j-2) A person required to render property for taxation
96	96		under Subsection (j-1) must render all tangible personal property
97	97		the person owns that is held or used for the production of income
98	98		and has taxable situs in the appraisal district. This subsection
99	99		does not apply to property exempt from taxation under a provision of
100	100		law other than Section 11.145.
101	101		(j-3) A person who elects not to render property for
102	102		taxation as authorized by Subsection (j-1) must file a rendition
103	103		statement or property report that includes a certification that the
104	104		person reasonably believes that the value of the property is not
105	105		more than the amount exempted under Section 11.145(b) or (d), as
106	106		applicable. The election takes effect beginning with the tax year
107	107		following the tax year in which the rendition statement or property
108	108		report is filed and continues in effect until the ownership of the
109	109		person changes. Notwithstanding Subsection (j-1), a person
110	110		described by that subsection must render property for taxation if
111	111		required by the chief appraiser.
112	112		(n) A rendition statement of a related business entity must
113	113		contain the information required by Subsection (a) or (f), as
114	114		applicable, stated for each related business entity that composes
115	115		the unified business enterprise of which the related business
116	116		entity that is the subject of the rendition is a part.
117	117		SECTION 1.03. Section 22.24(c), Tax Code, is amended to
118	118		read as follows:
119	119		(c) The comptroller may prescribe or approve different
120	120		forms for different kinds of property but shall ensure that each
121	121		form requires a property owner to furnish the information necessary
122	122		to identify the property and to determine its ownership,
123	123		taxability, and situs. Each form must include a box that the
124	124		property owner may check to permit the property owner to affirm that
125	125		the information contained in the most recent rendition statement
126	126		filed by the property owner in a prior tax year is accurate with
127	127		respect to the current tax year in accordance with Section
128	128		22.01(l). Each form must include a box that a property owner that
129	129		is a related business entity, as defined by Section 11.145, must
130	130		check to identify the owner as a related business entity. Each form
131	131		must include a box that a property owner who elects not to render
132	132		the property for taxation as authorized by Section 22.01(j-1) must
133	133		check to certify that the owner reasonably believes that the value
134	134		of the property is not more than the amount exempted under Section
135	135		11.145(b) or (d), as applicable. A form may not require but may
136	136		permit a property owner to furnish information not specifically
137	137		required by this chapter to be reported. In addition, a form
138	138		prescribed or approved under this subsection must contain the
139	139		following statement in bold type: "If you make a false statement on
140	140		this form, you could be found guilty of a Class A misdemeanor or a
141	141		state jail felony under Section 37.10, Penal Code."
142	142		SECTION 1.04. Chapter 25, Tax Code, is amended by adding
143	143		Section 25.14 to read as follows:
144	144		Sec. 25.14. INVENTORY AND TANGIBLE PERSONAL PROPERTY. (a)
145	145		In this section, "inventory" means:
146	146		(1) a finished good held for sale, resale, lease, or
147	147		rental;
148	148		(2) a raw or finished material held to be incorporated
149	149		into or attached to tangible personal property to create a finished
150	150		good; or
151	151		(3) a material or supply, including fuel or a spare
152	152		part, being held for future use.
153	153		(b) For purposes of this section, the term "inventory" does
154	154		not include:
155	155		(1) a dealer's motor vehicle inventory, as defined by
156	156		Section 23.121;
157	157		(2) a dealer's vessel and outboard motor inventory, as
158	158		defined by Section 23.124;
159	159		(3) a dealer's heavy equipment inventory, as defined
160	160		by Section 23.1241; or
161	161		(4) retail manufactured housing inventory, as defined
162	162		by Section 23.127.
163	163		(c) Except as provided by Subsection (d), a person's
164	164		inventory shall be listed separately from any other tangible
165	165		personal property the person holds or uses for the production of
166	166		income.
167	167		(d) This section does not apply to tangible personal
168	168		property for which a person is required to file a rendition
169	169		statement under Section 22.01(j-3) but that the person is not
170	170		required to render for taxation under any other provision of that
171	171		section.
172	172		SECTION 1.05. Section 31.01, Tax Code, is amended by
173	173		amending Subsection (c) and adding Subsection (c-3) to read as
174	174		follows:
175	175		(c) The tax bill or a separate statement accompanying the
176	176		tax bill shall:
177	177		(1) identify the property subject to the tax;
178	178		(2) state the appraised value, assessed value, and
179	179		taxable value of the property;
180	180		(3) if the property is land appraised as provided by
181	181		Subchapter C, D, E, or H, Chapter 23, state the market value and the
182	182		taxable value for purposes of deferred or additional taxation as
183	183		provided by Section 23.46, 23.55, 23.76, or 23.9807, as applicable;
184	184		(4) state the assessment ratio for the unit;
185	185		(5) state the type and amount of any partial exemption
186	186		applicable to the property, indicating whether it applies to
187	187		appraised or assessed value;
188	188		(6) state the total tax rate for the unit;
189	189		(7) state the amount of tax due, the due date, and the
190	190		delinquency date;
191	191		(8) explain the payment option and discounts provided
192	192		by Sections 31.03 and 31.05, if available to the unit's taxpayers,
193	193		and state the date on which each of the discount periods provided by
194	194		Section 31.05 concludes, if the discounts are available;
195	195		(9) state the rates of penalty and interest imposed
196	196		for delinquent payment of the tax;
197	197		(10) include the name and telephone number of the
198	198		assessor for the unit and, if different, of the collector for the
199	199		unit;
200	200		(11) for real property, state for the current tax year
201	201		and each of the preceding five tax years:
202	202		(A) the appraised value and taxable value of the
203	203		property;
204	204		(B) the total tax rate for the unit;
205	205		(C) the amount of taxes imposed on the property
206	206		by the unit; and
207	207		(D) the difference, expressed as a percent
208	208		increase or decrease, as applicable, in the amount of taxes imposed
209	209		on the property by the unit compared to the amount imposed for the
210	210		preceding tax year; [and]
211	211		(12) for real property, state the differences,
212	212		expressed as a percent increase or decrease, as applicable, in the
213	213		following for the current tax year as compared to the fifth tax year
214	214		before that tax year:
215	215		(A) the appraised value and taxable value of the
216	216		property;
217	217		(B) the total tax rate for the unit; and
218	218		(C) the amount of taxes imposed on the property
219	219		by the unit; and
220	220		(13) for tangible personal property, state separately
221	221		the amount of taxes imposed on a person's inventory from the amount
222	222		of taxes imposed on any other tangible personal property the person
223	223		held or used for the production of income.
224	224		(c-3) For purposes of Subsection (c), "inventory" has the
225	225		meaning assigned by Section 25.14.
226	226		SECTION 1.06. This article applies only to ad valorem taxes
227	227		imposed for a tax year that begins on or after the effective date of
228	228		this article.
229	229		SECTION 1.07. This article takes effect January 1, 2024,
230	230		but only if the constitutional amendment proposed by the 88th
231	231		Legislature, Regular Session, 2023, to authorize the legislature to
232	232		exempt from ad valorem taxation a portion of the market value of
233	233		tangible personal property that is held or used for the production
234	234		of income is approved by the voters. If that amendment is not
235	235		approved by the voters, this article has no effect.
236	236		ARTICLE 2. FRANCHISE TAX CREDIT FOR INVENTORY AD VALOREM TAX
237	237		LIABILITY
238	238		SECTION 2.01. Chapter 171, Tax Code, is amended by adding
239	239		Subchapter N to read as follows:
240	240		SUBCHAPTER N. TAX CREDIT FOR INVENTORY TAX LIABILITY
241	241		Sec. 171.701. DEFINITION. (a) In this subchapter,
242	242		"inventory" means:
243	243		(1) a finished good held for sale, resale, lease, or
244	244		rental, including:
245	245		(A) a dealer's vessel and outboard motor
246	246		inventory, as defined by Section 23.124;
247	247		(B) a dealer's heavy equipment inventory, as
248	248		defined by Section 23.1241; or
249	249		(C) retail manufactured housing inventory, as
250	250		defined by Section 23.127;
251	251		(2) a raw or finished material held to be incorporated
252	252		into or attached to tangible personal property to create a finished
253	253		good; or
254	254		(3) a material or supply, including fuel or a spare
255	255		part, being held for future use.
256	256		(b) Notwithstanding Subsection (a) and for purposes of this
257	257		subchapter, the term "inventory" does not include a dealer's motor
258	258		vehicle inventory, as defined by Section 23.121.
259	259		Sec. 171.702. ELIGIBILITY FOR CREDIT. A taxable entity is
260	260		entitled to apply for a credit against the tax imposed under this
261	261		chapter in the amount and under the conditions provided by this
262	262		subchapter.
263	263		Sec. 171.703. AMOUNT OF CREDIT; LIMITATIONS. (a) Subject
264	264		to Subsections (b) and (c), the amount of a taxable entity's credit
265	265		for a report is equal to the lesser of:
266	266		(1) the total franchise tax due for the report after
267	267		applying all other applicable credits; or
268	268		(2) 20 percent of the aggregate amount of ad valorem
269	269		taxes imposed by each taxing unit during the ad valorem tax year
270	270		preceding the year in which the report is originally due on property
271	271		owned by the taxable entity that were derived from the taxable value
272	272		of inventory owned by the taxable entity and located in this state.
273	273		(b) The total amount of credits that may be awarded under
274	274		this subchapter for all reports originally due in a year may not
275	275		exceed $700 million.
276	276		(c) The comptroller by rule shall prescribe procedures by
277	277		which the comptroller will allocate credits under this subchapter.
278	278		The procedures must provide that if the total amount of credits for
279	279		which taxable entities apply under Subsection (a) exceeds the limit
280	280		under Subsection (b) for a calendar year, the comptroller shall:
281	281		(1) for each taxable entity that applied for the
282	282		credit, reduce the amount under Subsection (a)(2) to a pro rata
283	283		share of $700 million based on the amount of ad valorem taxes
284	284		described by Subsection (a)(2) imposed on property of the taxable
285	285		entity and on property of all taxable entities that applied for the
286	286		credit;
287	287		(2) after making the reductions under Subdivision (1),
288	288		determine the amount by which each taxable entity's pro rata share
289	289		under Subdivision (1) exceeds the amount provided by Subsection
290	290		(a)(1) for the taxable entity, if any, and the sum of those amounts
291	291		for all taxable entities; and
292	292		(3) allocate the sum determined under Subdivision (2)
293	293		to other taxable entities that applied for the credit on a pro rata
294	294		basis to partly or wholly restore the amount reduced under
295	295		Subdivision (1).
296	296		(d) For purposes of Subsection (a)(2), the aggregate amount
297	297		of ad valorem taxes imposed on property owned by the taxable entity
298	298		that were derived from the taxable value of inventory does not
299	299		include, and a taxable entity is not entitled to a credit for any
300	300		taxes imposed on, the taxable value of any inventory for which the
301	301		taxable entity was exempt from taxation under Section 11.145.
302	302		(e) For purposes of calculating the amount of the credit
303	303		under this subchapter in connection with the 2023 ad valorem tax
304	304		year, a taxable entity may make a good faith estimate of the portion
305	305		of the ad valorem taxes imposed on the taxable entity's property
306	306		that were derived from inventory owned by the taxable entity and
307	307		located in this state. For purposes of this subsection, "good
308	308		faith" means honesty in fact and intention and requires the absence
309	309		of an intent to mislead or deceive. This subsection expires January
310	310		1, 2026.
311	311		Sec. 171.704. APPLICATION FOR CREDIT. (a) A taxable entity
312	312		must apply for the credit under this subchapter on or with the
313	313		originally filed report for the period for which the credit is
314	314		claimed.
315	315		(b) The comptroller shall prescribe the form and method for
316	316		applying for a credit under this subchapter. A taxable entity must
317	317		use the form in applying for the credit and submit the form
318	318		electronically with the report for the period for which the credit
319	319		is claimed.
320	320		(c) The comptroller may require the taxable entity to
321	321		include any other information the comptroller determines is
322	322		necessary to demonstrate:
323	323		(1) whether the entity is eligible for the credit; and
324	324		(2) the amount of the credit.
325	325		(d) The burden of establishing eligibility for and the
326	326		amount of the credit is on the taxable entity.
327	327		(e) The comptroller may request permission to examine the
328	328		books and records of a taxable entity as necessary to determine
329	329		whether the entity is entitled to a credit under this subchapter and
330	330		the amount of the credit. The comptroller may disallow the credit
331	331		if the taxable entity refuses to allow the comptroller to examine
332	332		the books and records.
333	333		Sec. 171.705. ADMINISTRATION OF CREDIT; REFUND. (a) The
334	334		comptroller may require a taxable entity that applies for a credit
335	335		under this subchapter to submit with the report a payment for all or
336	336		part of the taxes to which the credit applies. As soon as
337	337		practicable after determining the amount of the credit under
338	338		Section 171.703, the comptroller shall issue a warrant for any
339	339		portion of the credit for which payment was made.
340	340		(b) The amount of a warrant issued by the comptroller under
341	341		Subsection (a) does not accrue interest under Section 111.064.
342	342		Sec. 171.706. SALE, ASSIGNMENT, OR CARRYFORWARD
343	343		PROHIBITED. A taxable entity that receives a credit under this
344	344		subchapter may not sell, assign, or carry forward any part of the
345	345		credit.
346	346		Sec. 171.707. RULES. The comptroller shall adopt rules as
347	347		necessary to implement and administer this subchapter.
348	348		SECTION 2.02. Subchapter N, Chapter 171, Tax Code, as added
349	349		by this article, applies only to a report originally due on or after
350	350		the effective date of this article.
351	351		SECTION 2.03. This article takes effect January 1, 2024.