By: Harrison H.B. No. 698
A BILL TO BE ENTITLED
AN ACT
relating to the abolition of ad valorem taxes and the creation of a
joint interim committee on the abolition of those taxes.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. (a) In this section, "committee" means the joint
interim committee on the abolition of ad valorem taxes.
(b) The joint interim committee on the abolition of ad
valorem taxes is composed of:
(1) five members of the house of representatives
appointed by the speaker of the house of representatives; and
(2) five senators appointed by the lieutenant
governor.
(c) The speaker of the house of representatives and the
lieutenant governor shall make the appointments under Subsection
(b) of this section not later than February 1, 2026.
(d) The speaker of the house of representatives and the
lieutenant governor shall each designate a co-chair from among the
committee members.
(e) The committee shall convene at the joint call of the
co-chairs.
(f) The committee has all other powers and duties provided
to a special or select committee by the rules of the senate and
house of representatives, by Subchapter B, Chapter 301, Government
Code, and by policies of the senate and house committees on
administration.
(g) The committee shall conduct a comprehensive study to
determine how to replace local tax revenue that will be lost when ad
valorem taxes are abolished with local sales and use tax revenue.
(h) The committee shall:
(1) consider whether political subdivisions that
currently impose ad valorem taxes would have the authority to
impose sales and use taxes;
(2) determine the average sales and use tax rate for
each type of political subdivision that would be necessary to
generate the same amount of tax revenue as the amount of tax revenue
lost as a result of the abolition of ad valorem taxes;
(3) determine, if appropriate, the effect that
broadening the application of sales and use taxes at the local level
would have on the tax rates identified under Subdivision (2) of this
subsection;
(4) identify whether tax revenue generated by sales
and use taxes would require redistribution to offset disparities in
available local tax revenue as a result of the abolition of ad
valorem taxes and, if so, evaluate the different mechanisms of
redistribution available; and
(5) identify and examine any other issue that would
need to be addressed to implement the abolition of ad valorem taxes.
(i) On request of the committee, a state agency or political
subdivision shall provide information for and assistance in
conducting the study under this section.
(j) Not later than December 1, 2026, the committee shall
prepare and submit to the legislature a written report containing
the results of the study and any recommendations for legislative or
other action.
(k) The committee is abolished and this section expires
January 1, 2027.
SECTION 2. (a) Title 1, Tax Code, is repealed.
(b) Notwithstanding any other law, this state or a political
subdivision of this state may not impose an ad valorem tax. To the
extent of a conflict, this section controls over a conflicting
provision in a general or special law.
(c) The change in law made by this section does not affect
tax liability accruing before January 1, 2031. That liability
continues in effect as if this section 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 3. (a) This Act takes effect as provided by
Subsections (b) and (c) of this section, but only if the
constitutional amendment proposed by the 89th Legislature, Regular
Session, 2025, to abolish ad valorem taxes is approved by the
voters. If that amendment is not approved by the voters, this Act
has no effect.
(b) This section and Section 1 of this Act take effect
January 1, 2026.
(c) Section 2 of this Act takes effect January 1, 2031.