By: Parker, et al. S.B. No. 5
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 who leases tangible personal property is
entitled to an exemption from taxation by a taxing unit of $25,000
of the total appraised value of all the tangible personal property
the person owns that is held or used for the production of income
and is subject to a lease, regardless of where the property is
located in the taxing unit.
(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).
(h) When calculating an exemption to which the person is
entitled under this section, a taxing unit shall apply the amount of
the exemption to tangible personal property other than inventory
that the person owns and is held or used for the production of
income before applying the exemption to inventory owned by the
person.
(h-1) For purposes of Subsection (h), "inventory" has the
meaning assigned by Section 171.701.
SECTION 1.02. Section 22.01, Tax Code, is amended by
amending Subsection (c-1) and adding Subsections (j-1), (j-2),
(j-3), and (n) to read as follows:
(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.
(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. Chapter 25, Tax Code, is amended by adding
Section 25.14 to read as follows:
Sec. 25.14. INVENTORY AND TANGIBLE PERSONAL PROPERTY. (a)
In this section, "inventory" means:
(1) a finished good held for sale, resale, lease, or
rental;
(2) a raw or finished material held to be incorporated
into or attached to tangible personal property to create a finished
good; or
(3) a material or supply, including fuel or a spare
part, being held for future use.
(b) For purposes of this section, the term "inventory" does
not include:
(1) a dealer's motor vehicle inventory, as defined by
Section 23.121;
(2) a dealer's vessel and outboard motor inventory, as
defined by Section 23.124;
(3) a dealer's heavy equipment inventory, as defined
by Section 23.1241; or
(4) retail manufactured housing inventory, as defined
by Section 23.127.
(c) Except as provided by Subsection (d), a person's
inventory shall be listed separately from any other tangible
personal property the person holds or uses for the production of
income.
(d) This section does not apply to tangible personal
property for which a person is required to file a rendition
statement under Section 22.01(j-3) but that the person is not
required to render for taxation under any other provision of that
section.
SECTION 1.05. Section 31.01, Tax Code, is amended by
amending Subsection (c) and adding Subsection (c-3) to read as
follows:
(c) The tax bill or a separate statement accompanying the
tax bill shall:
(1) identify the property subject to the tax;
(2) state the appraised value, assessed value, and
taxable value of the property;
(3) if the property is land appraised as provided by
Subchapter C, D, E, or H, Chapter 23, state the market value and the
taxable value for purposes of deferred or additional taxation as
provided by Section 23.46, 23.55, 23.76, or 23.9807, as applicable;
(4) state the assessment ratio for the unit;
(5) state the type and amount of any partial exemption
applicable to the property, indicating whether it applies to
appraised or assessed value;
(6) state the total tax rate for the unit;
(7) state the amount of tax due, the due date, and the
delinquency date;
(8) explain the payment option and discounts provided
by Sections 31.03 and 31.05, if available to the unit's taxpayers,
and state the date on which each of the discount periods provided by
Section 31.05 concludes, if the discounts are available;
(9) state the rates of penalty and interest imposed
for delinquent payment of the tax;
(10) include the name and telephone number of the
assessor for the unit and, if different, of the collector for the
unit;
(11) for real property, state for the current tax year
and each of the preceding five tax years:
(A) the appraised value and taxable value of the
property;
(B) the total tax rate for the unit;
(C) the amount of taxes imposed on the property
by the unit; and
(D) the difference, expressed as a percent
increase or decrease, as applicable, in the amount of taxes imposed
on the property by the unit compared to the amount imposed for the
preceding tax year; [and]
(12) for real property, state the differences,
expressed as a percent increase or decrease, as applicable, in the
following for the current tax year as compared to the fifth tax year
before that tax year:
(A) the appraised value and taxable value of the
property;
(B) the total tax rate for the unit; and
(C) the amount of taxes imposed on the property
by the unit; and
(13) for tangible personal property, state separately
the amount of taxes imposed on a person's inventory from the amount
of taxes imposed on any other tangible personal property the person
held or used for the production of income.
(c-3) For purposes of Subsection (c), "inventory" has the
meaning assigned by Section 25.14.
SECTION 1.06. 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 1.07. 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. (a) In this subchapter,
"inventory" means:
(1) a finished good held for sale, resale, lease, or
rental, including:
(A) a dealer's vessel and outboard motor
inventory, as defined by Section 23.124;
(B) a dealer's heavy equipment inventory, as
defined by Section 23.1241; or
(C) retail manufactured housing inventory, as
defined by Section 23.127;
(2) a raw or finished material held to be incorporated
into or attached to tangible personal property to create a finished
good; or
(3) a material or supply, including fuel or a spare
part, being held for future use.
(b) Notwithstanding Subsection (a) and for purposes of this
subchapter, the term "inventory" does not include a dealer's motor
vehicle inventory, as defined by Section 23.121.
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 all reports originally due in a year may not
exceed $700 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 $700 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 Subsection (a)(2), the aggregate amount
of ad valorem taxes imposed on property owned by the taxable entity
that were derived from the taxable value of inventory does not
include, and a taxable entity is not entitled to a credit for any
taxes imposed on, the taxable value of any inventory for which the
taxable entity was exempt from taxation under Section 11.145.
(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
electronically with the report for the period for which the credit
is claimed.
(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. (a) 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.
(b) The amount of a warrant issued by the comptroller under
Subsection (a) does not accrue interest under Section 111.064.
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.