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Texas Legislative Update | January 9, 2019

by DMA Staff | Jan 09, 2019

Sales Tax     General or Multiple Taxes     Franchise Tax     Property Tax     Severance Tax

DMA - DuCharme, McMillen & Associates, Inc. provides this information relating to the 86th Texas Legislature Regular Session.

The Texas Constitution requires the Texas Comptroller at the beginning of each regular session to provide a report showing the state’s financial condition and estimating the revenue it can expect to receive during the next two-year budget period. On January 7, 2019, one day before the start of the regular session, Comptroller Glenn Hegar released the Biennial Revenue Estimate (BRE), which sets the parameters for spending by the Texas Legislature.

The released BRE indicates that Texas is projected to have approximately $119.12 billion in revenue available for general-purpose spending during the 2020-21 biennium. The amount is based on the following:                            

Beginning balance (which represents the surplus
remaining from 2018-2019)  
$4.18 billion
Add: estimated general revenue collection$121.48 billion
Subtract: transfer to the Economic Stabilization Fund
(commonly known in Texas as the Rainy Day Fund)
and State Highway Fund
$6.34 billion
Subtract: an amount set aside to cover the shortfall
in the Texas Tomorrow Fund (prepaid tuition plan) 
$0.21 billion

In addition to the general revenue-related funds, Texas is expected to collect $88.7 billion in federal receipts and other revenues dedicated for specific purposes and therefore unavailable for general-purpose spending. Absent any appropriations by the Legislature, the Rainy Day Fund balance is expected to be $15.4 billion at the end of the 2020-21 biennium.

Comptroller Hegar noted that the revenue estimate represents an 8.1% increase from the amounts available for the 2018-2019 biennium but warned that Texas is unlikely to see continued revenue growth at the unusually strong rates that it has seen in recent months because “[o]il prices have dropped sharply since October, financial markets have demonstrated increased volatility, interest rates have been rising and U.S. trade policy remains uncertain. And as the nation’s leading export state, the Texas economy in particular is exposed to potential reductions in international trade.” He announced that the BRE is based on a projection of continued but slowing expansion of the Texas economy.

Tax Bills

Here are tax bills that have been introduced since DMA’s legislative update dated December 4, 2018.

Sales Tax

HB 451 (Turner, Chris) would amend Tax Code §151.333(b) to include light-emitting diode (LED) lightbulbs to the list of items eligible for tax exemption during the energy efficiency sales tax holiday weekend in May.

HB 648 (Krause, Matt) would add Chapter 328 to the Tax Code, which would permit cities and counties to impose a supplemental sales and use tax in lieu of property tax. To qualify, a city or county would have to adopt an ordinance or order before June 30 of a year providing that property tax will not be imposed beginning January 1 of the following year. The tax rate in the first year can be set at a rate that would produce an amount equal to the city’s or county’s lost property tax revenue but thereafter, a city or county may increase or reduce the tax rate. With certain minor exceptions, the supplemental sales and use tax would be administered similarly as other city or county local sales/use taxes.
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General Tax

HJR 32 (Shaheen, Matt) proposes a constitutional amendment that would require an affirmative record vote of two-thirds of all members elected to each house of the legislature for passage of a bill that imposes a new state tax or increases the rate of an existing tax above the rate in effect on the date the bill was filed.

HJR 38 (Leach, Jeff) and SJR 23 (Fallon, Pat) propose a constitutional amendment that would repeal the Bullock Amendment (Article 8, Section 24) of the Texas Constitution that requires the approval of a personal income tax on individuals in a state-wide referendum and would replace it with a constitutional provision that prohibit any state taxation of the net income of individuals, including an individual's share of partnership or unincorporated association's income.
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Franchise Tax

HB 605 (Thierry, Shawn) would allow a taxable entity to claim a tax credit if the entity opens a grocery store or healthy corner that is located in a low-income or high poverty area with limited access to healthy food retailers. The tax credit is 5% of eligible cost incurred to establish the store during a certain 12-month period but the amount of credit that could be claimed in any given year is limited to 50% of the amount of tax due.
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Property Tax
 
(Excludes numerous bills that have been filed relating to residence homestead)

HB 470 (Paul, Dennis) would amend Tax Code §26.012 to lower the rollback rate from 8% to 4% for all taxing units other than small taxing units.  Small taxing units mean a taxing unit other than a school district with a population of less than 40,000. This bill would allow the use of the 8% rollback rate if any part of the taxing unit is located in an area declared a disaster area during the current tax year by the governor or by the president of the United States. 

HB 483 (Phelan, Dade) would require the board of directors of an appraisal district to be elected rather than appointed.

HB 490 (Shine, Hugh) would require the creation of the Property Tax Administration Advisory Board that will provide advice relating to the state administration of property tax and oversight of appraisal districts and would amend various provisions relating to tax-rate setting by local taxing units.

HB 491 (Shine, Hugh) would authorize an appraisal district in a county with a population of less than 120,000, at the option of the board of directors, to permit the local administrative district judge to appoint the members of the appraisal review board (ARB). This bill would require an ARB in a county with a population of 120,000 or more to pay per diem to ARB members and to provide clerical assistance to the ARB, including assisting the ARB with the scheduling and arranging of hearings.

HB 492 (Shine, Hugh) and HB 493 (Shine, Hugh) would provide a temporary exemption from taxation of a portion of the appraised value of qualified property that is damaged by a disaster if the governing body has adopted the exemption. HB 492 and HB 493 are identical except HB 493 would allow a taxing unit to obtain reimbursement from the state if the taxing unit pays refunds to property owners under the new disaster exemption established under the bill. HJR 34 and HJR 35, both by Rep. Shine propose a constitutional amendment for a temporary exemption for qualifying property damaged by a disaster.

HB 564 (Nevarez, Poncho) would amend the definition of “heavy equipment” provided by Tax Code §23.1241(a)(6) to exclude a natural gas compressor package or unit.

HB 614 (Murphy, Jim) would amend Tax Code §§23.46, 23.47, 23.55, 23.58, 23.76, and 23.9807 to eliminate interest on the additional tax imposed when the use of land is diverted from agriculture, open-space, or timber but would retain interest when the additional tax is not timely paid. The bill would also change the number of years for which the additional tax is based from five to three years.

HB 639 (Springer, Drew) would amend Tax Code §23.51(1) which defines “qualified open-space land” to include land that is used principally as an ecological laboratory by a college or university by requiring that the college or university must have used principally in that manner for five of the preceding seven years.

HB 648 (Krause, Matt) would add Chapter 328 to the Tax Code, which would permit cities and counties to impose a supplemental sales and use tax in lieu of property tax. To qualify, a city or county would have to adopt an ordinance or order before June 30 of a year providing that property tax will not be imposed beginning January 1 of the following year. The tax rate in the first year can be set at a rate that would produce an amount equal to the city’s or county’s lost property tax revenue but thereafter, a city or county may increase or reduce the tax rate.
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Severance Tax

SB 214 (Seliger, Kel) would transfer oil and gas production tax revenue in excess of a certain percentage into an account set aside for tax relief rather than into the Rainy Day Fund and would adjust tax rates based on available funds in the tax relief account. SJR 21 (Seliger) proposes a constitutional amendment to effectuate the transfer of oil and gas production tax revenue and the use of the fund for tax relief.
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