The DMA Way

Texas Legislative Update

by DMA Staff | Mar 20, 2017
DMA-Texas-Legislative-Update-March 20 2017

DuCharme, McMillen & Associates, Inc. (DMA) provides this update relating to the 85th Texas Legislature Regular Session.
The deadline to introduce bills expired on March 10, 2017, which means, for all practical purposes, all bills that the legislature may consider this session have been filed. Many of the introduced bills, however, will languish in committees and die by operation of law. The House Ways & Means Committee and the Senate Finance Committee are the gatekeepers of tax-related bills and will decide which tax proposals will be heard and/or advanced in the legislative process. Because Texas is facing a net revenue shortfall, tax bills with any fiscal impact will have a hard time passing out of a committee. The tax proposals that have the strongest chance of passing this legislative session are the proposals that are supported or proposed by House or Senate Leadership and the Comptroller’s technical proposals, because the Comptroller’s fiscal notes will indicate that the agency’s proposals have no or insignificant fiscal impact or provide the protection needed to preserve the existing revenue stream.

The Comptroller’s office has not offered a technical bill since 2007, but prior to that, it was common for the Comptroller’s office to offer technical fixes. This session the Comptroller has opted to split up his proposals into multiple tax bills with narrow captions instead of filing a single omnibus tax bill that includes all of the agency’s proposals. This approach is intended to prevent unwanted amendments from being added to the bills. DMA has identified the Comptroller’s legislative proposals by notes below.

The Senate Finance Committee’s hearing held on March 14, 2017, was focused on property tax bills. The most controversial bill at the hearing was SB 2 (Bettencourt, Paul), which is entitled the Property Tax Reform and Relief Act of 2017. The bill proposes numerous changes that Senator Bettencourt had previously advocated as necessary to provide “simplification, clarification and transparency of the property tax and appraisal system.” Cities and counties opposed SB 2 and repeatedly testified that they were under budget constraints due to unfunded mandates by the state and that SB 2 would impose additional budgetary burdens on them. Their primary objection is to the SB 2 proposal to lower the growth rate of property taxes by reducing the rollback rate from 8 percent to 4 percent, which has been characterized by the local jurisdictions as a revenue cap, and by requiring a voter tax ratification election if the taxing unit adopts a tax rate that exceeds the rollback rate. Senator Bettencourt responded that it is not a revenue cap because the local jurisdictions can still take the matter to the voters and can add new properties. Moreover, Senator Bettencourt noted that with the existing exemptions the 4 percent rate would actually mean a revenue growth of 10 percent or less, just as the current 8 percent rate limit has resulted in revenue growth of 12 percent to 13 percent. SB 2, as substituted, was voted out of the committee by a vote of 9-5. 

The Senate Finance Committee also voted out the following bills on March 14:

SB 629 (Schwertner, Charles) would eliminate the 7 percent interest imposed on additional ad valorem tax that is due for the three preceding years if the open land designated for agricultural use is sold or diverted to a nonagricultural use. 

SB 669 (Nelson, Jane) would increase the education requirements for members of appraisal review boards (ARB), would provide property owners with the opportunity to provide feedback to the ARB, and would set out hearing procedures favorable to taxpayers. The committee voted out a substitute for this bill and recommended that it be placed on the Local & Uncontested Calendar.

SB 717 (Taylor, Van) and SB 972 (Zaffirini, Judith) would require the reappraisal of property if it is damaged after January 1. Committee substitutes were passed for both bills. The committee substitute for SB 717 would require the reappraisal if the Federal Emergency Management Agency estimates the damage sustained by the property to be 5 percent or greater. SB 972 would allow a property owner to request the reappraisal if a building on the property is destroyed by casualty. 

SB 730 (Bettencourt, Paul) would increase the minimum amount for the taxable value of income-producing tangible personal property to be exempt from rendition and tax from $500 to $2,500.

SB 731 (Bettencourt, Paul) would expand the eligibility for binding arbitration by increasing the appraised or market value, as determined by the ARB’s order, for properties (other than residence homesteads) from $3 million or less to $5 million or less.

SB 870 (Bettencourt, Paul) would prohibit an ARB from scheduling a protest hearing on a Sunday.

SB 946 (Bettencourt, Paul) would set a new late application deadline of June 1 for Freeport applications, make changes to the filing deadline for completed interstate allocation applications, and require rendition statements and property reports for property located in an appraisal district in which one or more taxing units exempt Freeport goods to be delivered to the chief appraiser not later than April 1 and for property regulated by the Texas Public Utility Commission, the Texas Railroad Commission, the federal Surface Transportation Board, or the Federal Energy Regulatory Commission to be delivered to the chief appraiser not later than April 30, except as provided by Tax Code §22.02.

On March 16, 2017, the Senate Business & Commerce Committee voted out SB 559 (Hancock, Kelly) that would modify provisions in Chapter 181, Tax Code (Miscellaneous Gross Receipts Tax), to impose tax on each utility company that “makes a sale to an ultimate consumer” in an incorporated city or town having a population of more than 1,000. [Note: This bill is one of the Comptroller’s legislative proposals. The introduced bill stated the change was a clarification of existing law, but the committee substitute removes that language from the bill. However, the fiscal note still indicates that the committee substitute “would clarify existing law” and would have no fiscal impact.]

The House Ways & Means Committee heard 19 bills on March 15, 2017, but left all of those bills pending. The committee voted out several bills that were heard last week, one of which was HB 1346 (Button, Angie). The bill would change the deadline that a lessor of heavy equipment would file to report unit property tax collected from lessees from the 10th day to the 20th day of the month.

Here are tax-related bills that have been filed since our last update on March 2, 2017. For the sake of brevity, DMA has omitted newly filed tax bills from this update that were either redundant (i.e., identical or similar to previously filed bills) or irrelevant to most businesses.

Cigarette Tax/Other Tobacco Tax
HB 2692 (Wray, John) and SB 1390 (Hinojosa, Chuy) would amend Tax Code §154.210(a) to change the return filing date for a distributor report for cigarette tax from the last day of each month to the 25th day of each month and would add a new statute to Chapter 154, Tax Code, to exempt cigarettes that are sold to certain research facilities and used for experimental purposes.

SB 1505 (Hinojosa, Chuy) would modify the definition of "cigarette" to include a little cigar, which would make little cigars subject to cigarette tax under Chapter 154, Tax Code. The term “little cigar” means a roll for smoking that: (1) is made of tobacco or tobacco mixed with another ingredient; (2) contains an integrated cellulose filter or other similar filter; and (3) is wrapped with a material other than natural leaf tobacco. The bill provides that the revenue attributed to the tax on little cigars would be dedicated to the Property Tax Relief Fund. 

Economic Development
HB 2621 (Darby, Drew) would provide for multiple tax benefits for tertiary recovery projects in an area designated as an enhanced recovery reinvestment zone. The tax benefits include: (1) a limitation on the appraised value; (2) a refund of sales/use tax paid by a person designated as the operator for the reinvestment zone; (3) a sales/use tax exemption on certain purchases; and (4) an exemption from oil production tax on the incremental production of oil from a tertiary recovery project designated by the Railroad Commission.

HB 3086 (Murphy, Jim) would amend Chapter 313, Tax Code (the Texas Economic Development Act), as follows: (1) change the definition of “qualifying job” to include a job transferred from one area in Texas to another if the transfer represents a net new job in Texas; (2) modify the wage requirement to qualify a job that pays 110 percent of the lesser of the state median annual wage for manufacturing jobs in Texas or the county average annual wage for manufacturing jobs in the county; (3) add a definition of “county average annual wage for all jobs”; (4) add a definition of “state median annual wage for manufacturing jobs” and “state median annual wage for all jobs”; (5) change the wage requirement for nonqualifying jobs from the average “weekly” wage to the average “annual” wage and require the wage to exceed the lesser of the state median annual wage for all jobs in the state or the county average annual wage for all jobs in the county; (6) prohibit a school district from waiving a requirement that the jobs created must be qualifying jobs; (7) specify that the tax limitation agreement must state the dollar amount of the qualified investment that must be made and the number of new qualifying jobs that must be created; (8) provide that if the tax limitation agreement does not include the required information, the relevant provisions of the approved application are considered as part of the agreement; (9) impose a disclosure requirement on a member of the governing body of a school district or an employee of a school district of any potential conflict of interest; and (10) prohibit a person who discloses a conflict of interest from participating in any decision making unless the school district expressly waives the prohibition. 

HB 3176 (Button, Angie) would amend Chapter 313, Tax Code (the Texas Economic Development Act), as follows: (1) impose a disclosure and recusal requirement on a member of the board of trustees of a school district if the member has an interest in a matter related to an application for a limitation on appraised value that is before the school district or has a substantial financial interest in an entity that has a direct interest in a matter related to the application; (2) amend Tax Code §313.027(i) to decrease the total amount per year that a school district may accept in supplemental payments from $50,000 to $37,500; and (3) require the Comptroller to verify data reported by a recipient of a limitation on appraised value based on any reliable source.

HB 3230 (Phelan, Dade) would amend Tax Code §312.205(a) to require a municipal property tax abatement agreement or a municipal property voluntary cleanup agreement to include either of the following: (1) a waiver by the property owner of the right to protest before an appraisal review board and the right to contest in any court the unequal appraisal of property subject to the agreement for a tax year in which a portion of the property is exempt from taxation under the agreement; or (2) a recapture provision to recoup all or a portion of the property tax revenue lost as a result of the agreement if the appraised value of the property subject to the agreement does not attain a value specified in the agreement for a year covered by the agreement.

HB 3360 (Button, Angie) would require the Economic Incentive Oversight Board to examine the effectiveness, efficiency, and financial impact of the Texas Economic Development Act, and determine whether the purpose and intent of the Act is being accomplished. The bill would require the board to schedule periodic reviews, make recommendations, and report its findings and recommendations to the legislature before each session.

SB 1387 (Hinojosa, Chuy) would modify the definition of a “new permanent job” and “retained job” for purposes of the Enterprise Zone program by changing the current requirement that such a job must provide at least 1,820 hours of employment per year for the duration of the project’s designation period and substituting it with the requirement that the job must be certified by the qualified business as a full-time position that provides employment benefits, including health care benefits. 

SB 1627 (Estes, Craig) would amend Chapter 313, Tax Code (the Texas Economic Development Act), as follows: (1) prohibit a person from acting as a consultant for compensation on behalf of a school district in relation to an application or agreement for a limitation on appraised value if the person is an employee of the school district, is a member of the board of trustees of the school district or is related to any of the foregoing persons in the first degree by consanguinity or affinity; (2) amend Tax Code §313.022(b) to eliminate the applicability of the categories of taxable value of property to the minimum amount of a limitation on appraised value and to replace it with the minimum amount equal to at least 33.3 percent of the market value of the person’s qualified property for that tax year; (3) amend Tax Code §313.025(a) to eliminate the requirement that the application must be accompanied by a fee; (4) amend Tax Code §313.027(f) to modify existing terms as to what must be included in the appraisal limitation agreement, including adding that the property owner is required to provide a supplemental payment to the district or another entity on behalf of the district in an amount equal to $25 per student per year in average daily attendance for each ad valorem tax year covered by the agreement, except that in a tax year, no district may collect in supplemental payments from all property owners in the district an amount equal to more than 2 percent of the district's budget; and (5) repeal Tax Code §313.027(i) which limits supplemental payments to $100 per student per year or a total of $50,000 per year.

Franchise Tax
HB 28 (Bonnen, Dennis) would use certain surplus state revenue to phase out the franchise tax. The bill would require the Comptroller to determine after September 1 but before December 15 of each odd-numbered year the ending balance of general revenue funds available for certification for the preceding state fiscal biennium and the franchise tax rates that, if applied beginning January 1 of the next year, would yield biennial revenue equal to the lesser of the ending cash balance for the preceding biennium or $3.5 billion. The Comptroller would reduce the franchise tax rates in effect proportionally and publish the adjusted tax rates in the Texas Register. The adjusted tax rates would apply to a report originally due on or after January of the even-numbered year following the adjusted rates adoption, and when the adjusted tax rates are less than 15 percent of the tax rates in effect on September 1, 2017, the bill would repeal Chapter 171, Tax Code, on December 31 of that year.

HB 2833 (Oliveira, Rene) would allow a taxable entity to take a credit against franchise tax for the wages paid to or incurred by the taxable entity for an employee that the Texas Workforce Commission certifies is a qualified veteran that meets certain assistance requirements.

HB 2961 (Anderson, Rodney) would amend Tax Code §171.1011, to allow a taxable entity that is primarily engaged in the business of information technology staffing to exclude from its total revenue subcontracting payments made under a contract or subcontract entered into by the taxable entity to provide services, labor, or materials in connection with the actual or proposed design of software or the provision of information technology services.

HB 3299 (Thierry, Shawn) would allow a taxable entity to claim a franchise tax credit if, on or after January 1, 2018, the taxable entity opens a grocery store or healthy corner store that is located in a geographic area in Texas that the Comptroller determines to be an area either that has limited access to healthy food retailers and is a low-income or high poverty area or that has serious healthy food access limitations. 

HB 3345 (Springer, Drew) would amend Tax Code §171.0003(b) to specify that interest income by a person in the business of making loans to the general public is not considered passive income for purposes of meeting the definition of a passive entity. The bill provides that it is a clarification of existing law. [Note: This bill is one of the Comptroller’s legislative proposals.]

HB 3514 (Gervin-Hawkins, Barbara) would allow a taxable entity to claim a franchise tax credit if the taxable entity employs at least one low-level offender in a full-time employment position located or based in Texas, and the low-level offender is not arrested for or charged with a violent offense during the accounting period on which the report is based.

HB 3566 (Ashby, Trenton) would allow a taxable entity to claim a franchise tax credit for qualified railroad expenditures.

HB 3621 (Villalba, Jason) would allow a 25 percent discount on the tax due based on available revenue. The bill would require the Comptroller to compute and report the percentage changes in total general revenue-related funds available from certification from the current biennium to the succeeding biennium. If the percentage change is greater than five percent, the Comptroller would publish a notice, which would allow taxable entities to take a 25 percent discount after computing their taxes based on the rates in effect.

HB 3714 (Hinojosa, Gina) would allow a taxable entity that has more than 500 employees to claim a franchise tax credit for contributions made to the dependent care flexible spending account of each employee who receives from the taxable entity an annual salary or wage of not more than $65,000.

HB 3791 (Villalba, Jason) would amend Tax Code §171.1011, to provide that a taxable entity may exclude from its total revenue payments received from an insurance organization that is exempted from the franchise tax, if the insurance organization owns a controlling interest in the taxable entity.

HB 3992 (Murphy, Jim) would amend Tax Code §171.071, to expand the franchise tax exemption currently granted to a farmers’ cooperative society incorporated under Chapter 51, Agriculture Code, to also apply to a cooperative whose single member is a farmers’ cooperative described in Section 521(b)(1), Internal Revenue Code, that has at least 500 farmer-fruit grower members. The bill provides that it is a clarification of existing law.

HB 4002 (Bonne, Dennis) would amend Tax Code §171.1012(a)(2) to modify the definition of “production” by eliminating “installation” from it. The bill provides that it is a clarification of existing law. [Note: This bill is one of the Comptroller’s legislative proposals.]

HB 4055 (Murphy, Jim) and SB 1468 (Creighton, Brandon) would allow a taxable entity to claim a franchise tax credit for each eligible student who completes an eligible internship program offered by the taxable entity in Texas. 

HB 4247 (Walle, Armando) would allow a taxable entity that is a qualified small business to claim a franchise tax credit if the taxable entity, during the period on which margin is based, creates a certain number of qualifying new direct jobs in cities with low populations. 

HB 2723 (Shine, Hugh) and SB 1095 (Taylor, Larry) would amend Tax Code §111.009 to extend the deadline to file a petition for redetermination from 30 days to 60 days. 

HB 2756 (Cook, Byron) would amend Tax Code §111.009 and §111.105 to extend the deadline to file a petition for redetermination or a request for a refund hearing from 30 days to 60 days and to conform the deadline to file a motion for rehearing to the deadline for such motions under the Administrative Procedure Act. [Note: This bill is one of the Comptroller's legislative proposals.]

HB 3462 (Davis, Yvonne) would require the Comptroller to act within one year from the date a refund claim is filed by either granting the refund, denying the claim in whole or in part, or executing a settlement agreement for an amount not less than 90 percent of the refund claim. If a taxpayer appeals the refund denial and the Comptroller’s final hearing decision grants all or part of the refund claim that was previously denied, the Comptroller must pay a penalty to the taxpayer equal to 5 percent of the amount of the refund granted in the final decision. The bill would require the Comptroller to provide a report to the legislature setting out specific information, such as the number of refund claims, the number of refund claims not timely processed, and the reasons for not timely processing the refund claims.

Hotel Occupancy Taxes
HB 3181 (Springer, Drew) would amend Tax Code §352.002 to authorize the commissioners court of a county that has a population of less than 100,000 and that borders Lake Ray Roberts to impose a county hotel tax, but the tax rate may not exceed 3 percent of the price paid for a hotel room.

HB 3280 (Hinojosa, Gina) and SB 1221 (Watson, Kirk) would amend Chapter 351, Tax Code, to require a municipality that imposes a city hotel occupancy tax to report to the Comptroller by February 20 of each year the following information: (1) the tax rate; (2) the amount of revenue collected during the preceding fiscal year; and (3) the amount and percentage of the revenue allocated by the municipality for use to encourage, promote, and improve arts during the municipality's preceding fiscal year. 

Insurance Tax
HB 3630 (Lucio III, Eddie) would require the Comptroller to work with the Texas Workforce Commission to establish by a rule a credit against state premium tax liability for entities that make qualified equity investments in qualified community development entities in Texas. The purpose of the credit is to promote new job creation, job retention, and capital investment in economically distressed and low-income communities.

Motor Fuel Taxes
HB 2925 (Shine, Hugh) and SB 1557 (Kolkhorst, Lois) would amend Chapter 162, Tax Code, as follows: (1) add a presumption that no tax was paid by an exporter who claims an exemption based on export but who later sells in Texas gasoline or diesel fuel for which a tax exemption was claimed and would require such a person to file a report; (2) provide that gasoline or diesel fuel that is exempt based on export (to another state or a foreign country) loses the tax exemption status and tax is due at the time of sale if the gasoline or diesel fuel is sold to a person who does not hold a supplier, distributor, importer, or exporter license; (3) amend Tax Code §162.104(a) to delete the provision that allows a taxpayer to establish an exemption based on a bill of lading that has the destination state, that the purchased gasoline or diesel fuel is being exported, and that the exporter is licensed in the destination state; (4) amend Tax Code §162.401 to impose an additional penalty on a person who fails to report a subsequent sale in Texas of tax-free motor fuel purchased for export; and (5) amend provisions in Chapter 26, Water Code, relating to a fee on delivery of certain petroleum products by replacing the operator of a bulk facility with “supplier” as that term is defined by Chapter 162, Tax Code. [Note: This bill is one of the Comptroller’s legislative proposals.]

HB 3665 (Huberty, Dan) would add a definition of "volunteer fire department" to apply to the current exemption for fuel sold to a volunteer fire department for the department’s exclusive use. 

Motor Vehicle Sales/Use Tax
HB 2759 (Metcalf, Will) would amend Tax Code §152.022 (out-of-state purchase) and §152.023 (New Resident) to provide the taxes imposed by those statutes do not apply to an active duty member of the United States military or their spouse if the member can provide documentation of sales tax paid in the state of purchase, but Tax Code § 152.025 (Gift Tax of $10) would apply to the same persons if an appropriate affidavit of gift is submitted with any required supporting documentation to the tax assessor collector.

HB 3652 (Craddick, Tom) would amend the definition of “public agency” in Tax Code §152.001(7) to include an open-enrollment charter school, which would allow the school to be eligible for a current exemption on its purchase of a motor vehicle.

HB 4014 (Rodriguez, Eddie) and SB 2184 (Miles, Borris) would add a new section that requires the collection of tax on the sale of a motor vehicle by “verified invested sellers.” The Comptroller would verify that an applicant meets the requirements, and once verified, the entity would be exempt from the licensing requirements under Chapter 503, Transportation Code. To be a verified invested seller, the entity must show that it: (1) is in good standing under the laws of the state in which the entity was formed or organized, as evidenced by a certificate issued by the secretary of state or the state official having custody of the records pertaining to entities or other organizations formed under the laws of that state; (2) owes no delinquent taxes to a taxing unit of this state; (3) made a new capital investment in this state including a place of business and a facility for the servicing, including warranty servicing, that shall be furnished with all the equipment required to service; (4) generates more than 100 jobs in this state; (5) intends to remain regularly and actively engaged in the business at a location specified; and (6) intends that a bona fide employee will be at the location to buy, sell, lease, or exchange vehicles during reasonable and lawful business hours. 

New Taxes 
HB 3079 (Uresti, Tomas) would impose a new tax on the sale by a retailer of an animal-tested cosmetic in this state. The tax rate is 2.25 percent of the sales price of the cosmetic. The retailer or other person selling such cosmetics to the ultimate consumer shall pay the tax.

HB 3443 (Martinez, Armando) would add a new chapter to the Tax Code to impose a tax on each retail sale or lease of a new luxury motor vehicle (a vehicle with a gross sale or lease price of at least $60,000) by a franchised dealer at a dealership in the Lower Rio Grande Valley. The tax rate is 0.2 percent of the gross sale or lease price of the vehicle. The new tax would only apply to a sale that is subject to motor vehicle sales/use tax under Chapter 152, Tax Code, and the exemptions in Subchapter E, Chapter 152, apply to the new tax. The new tax on a lease of a new luxury vehicle would apply to leases in situations in which the transaction is not considered a sale under Chapter 152.

HB 3709 (Sheffield, J.D.) would add a new chapter to the Tax Code to authorize a county by order to impose a tax on the first sale of taxable material. "Taxable material" means clay, stone, sand, gravel, aggregate, limestone, caliche, metalliferous and nonmetalliferous ores, and other solid materials or substances of commercial value excavated in solid form from natural deposits on or in the earth. The term does not include coal or lignite. The tax rate is any rate not to exceed 15 cents for each ton or fraction of a ton of taxable material. The seller would collect the tax and report and remit it to the county.

Property Tax
HB 15 (Bonnen, Dennis) is entitled the Property Tax Payer Empowerment Act of 2017 and would make various changes, including the following: (1) change the term “effective” tax rate to “no new taxes” tax rate for taxing units other than school districts; (2) require the Comptroller to prescribe an electronic form of the worksheets to be used by each taxing unit in calculating the no new taxes tax rate and rollback tax rate; (3) require the Comptroller to create and maintain a property tax database that contains various specific information; (4) require that only debt approved by voters may be used in calculating rollback tax rates; (5) require that anticipated tax collection rate may not be lower than the lowest rate in the preceding three years for purposes of calculating the rollback tax rate; (6) change the rollback tax rate increase from 8 percent to 4 percent for taxing units other than school districts; (7) require the tax rate calculation worksheet to be certified by the chief appraiser and prohibit the adoption of a tax rate until the submission of the certified worksheet; and (8) require an automatic ratification election to approve a tax rate that exceeds the rollback rate. 

HB 2989 (Bonnen, Dennis) would require that when a refund is issued because a correction decreases the tax liability of a property after tax payment, the refund must be given to the property owner who paid the tax.

HB 3103 (Darby, Drew) would amend Tax Code §11.01 to provide that tangible personal property is considered to be used continually, whether regularly or irregularly, in Texas for purpose of tax jurisdiction if the property is used in Texas three or more times on regular routes or for three or more completed assignments occurring in close succession throughout the year.

HB 3138 (Guiterrez, Roland) would amend Tax Code §1.04(6) to expand the definition of intangible personal property to include (1) the value of a brand name, a business service, or a business; and (2) income derived from the operation of a business other than income from use of the property.

HB 3614 (Morrison, Geanie) would amend the definition of “new property value” in Tax Code §26.012 by including in the term “for purposes of a county, the increase in total taxable value of real property interests in oil or gas in place listed on the appraisal roll in the current year attributable to the production of oil or gas from wells completed after January 1 of the preceding year.”

SB 1812 (Taylor, Van) would amend Government Code §305.026 to provide that an appraisal district may not use public money to directly or indirectly influence or attempt to influence the passage or defeat of any legislation pending before the legislature. 

SB 2198 (Campbell, Donna) would add a new statute that sets forth an annual interest rate equal to the lesser of: (1) 12 percent; or (2) the sum of 2 percent and the prime rate quoted and published by the Federal Reserve Board on the first business day of the calendar year for which interest is being calculated. The bill would apply the interest rate to Tax Code §§11.135(c), 11.181(e), 11.185(e), 11.201(a), 23.46(c), 23.55, 23.76(a), 23.86, 23.96(a), 23.9807, 26.09(d), 31.12(a), 33.01(c), 33.06(d),33.065(g), and 42.42(c) and (d) and would authorize the waiver of the interest by the parties to a motion, effort, or appeal.

HB 27 (Springer, Drew) would amend Tax Code §23.01 as follows: (1) require a property (except residence homestead) to have the same highest and best use as the subject property to be considered a comparable property; (2) provide that a use restriction on a property that prohibits the continuation of the current use of the property, or prohibits a competitive use of the property, by a subsequent owner may not be considered in the determination of the property's highest and best use; and (3) provide that the determination of the market value of a property (except residence homestead) must consider whether the highest and best use of the property is the continuation of the current use of the property.

Appraisal Roll
HB 2906 (Raymond, Richard) and SB 1847 (Bettencourt, Paul) would amend Tax Code §25.25 to allow the correction of the appraisal roll if the appraisal review board (ARB) issues a written order to change the appraisal roll or related appraisal records for the current tax year and for either of the two preceding tax years to correct an inaccuracy in the appraised value of the owner's tangible personal property that is the result of an error or omission in a rendition statement or property report filed under Chapter 22 for the applicable tax year. 

HB 2946 (Sanford, Scott) would amend Tax Code §25.25(c) to authorize the appraisal roll to be changed for any of the five preceding years based on an ARB’s written order to correct an error in the square footage of a property described in the appraisal roll.

SB 2061 (Kolkhorst, Lois) would amend Tax Code §25.25(d) to authorize the appraisal roll to be changed by an ARB’s order to correct an error if the appraised value exceeds the market value of the property or the median appraised value of a reasonable number of comparable properties appropriately adjusted.

HB 2589 (Button, Angie) would add Tax Code §23.1244 to establish a valuation methodology for a retailer’s retail inventory. The market value is the total annual sales, less inventory shrinkage, sales at wholesale, and sales to retailers for the 12-month period corresponding to the preceding tax year, divided by 12. 

HB 2714 (Bohac, Dwayne) would amend Tax Code §11.252 to allow the owner of a leased motor vehicle to claim an exemption for a motor vehicle as not used in the production of income if the motor vehicle is leased to a state or local gpvernment or to a IRC §501(c)(3) organization that uses it exclusively for religious, educational, or charitable purposes. 

HB 2973 (Button, Angie) would add a new statute to exempt from tax by a county of the appraised value of the person’s inventory held for sale at retail if the exemption is adopted by the commissioners court of the county in the manner provided by law. HJR 096 (Button, Angie) proposes a constitutional amendment authorizing the exemption.

HB 4219 (Perez, Mary Ann) and SB 2028 (Rodriguez, Jose) would amend Tax Code §11.31, by adding that the Texas Commission on Environmental Quality (TCEQ) shall adopt by rule a list of property that is used wholly as a facility, device, or method for the control of air, water, or land pollution. The bill would require TCEQ to update the list every five years. Once the exemption is granted, the application for exemption need not be submitted in subsequent years but a chief appraiser may cancel the exemption if the chief appraiser determines that the facility, device, or method is no longer installed at the property or is no longer on TCEQ list and is no longer used wholly or partly for the pollution purpose. 

SB 2043 (Bettencourt, Paul) would amend Tax Code §11.251 to extend the deadline for Freeport goods relating to aircraft operated by a certificated air carrier from 175 days to 365 days.

Heavy Equipment Dealer
HB 3466 (King, Tracy) would make several changes, including: (1) amend the exclusion from the definition of a “dealer” by replacing the current exclusion of a person based on the filing of a rendition statement or property report in accordance with Chapter 22 with a person “who sales from the person’s heavy equipment inventory are made predominately to dealers” and (2) modify the computation of property tax on January 1 using the market value of the inventory as determined by the dealer on the last day of each month of the preceding tax year and by dividing that sum by 12.

HB 3850 (Zerwas, John) would amend Tax Code §23.1241 to remove a person who is in the business of “leasing or renting” heavy equipment from the definition of a dealer.

Sales Tax
HB 2475 (Davis, Sarah) would amend Tax Code §151.3101 to exempt a touring Broadway production from taxable amusement services when: (1) it is provided by an entity that has contracted with a nonprofit corporation or association (whose amusement services are exempt under Tax Code §151.3101(a)(3)) or with an educational, religious, law enforcement association or charitable association (whose amusement services are exempt under Tax Code §151.3101(a)(5)); (2) the contract is for a term of at least five years and provides for at least five presentations each year; and (3) it is held at a location either owned by, or leased or licensed for a term of at least one year to, the contracting entity that is a nonprofit corporation or association or an educational, religious, law enforcement association, or charitable association.

HB 2562 (Shine, Hugh), HB 2563 (Shine, Hugh), and SB 1962 (Creighton, Brandon) would amend Tax Code §151.3185, which currently exempts tangible personal property that will become an ingredient or component part of or that is necessary or essential to and used during the production of a motion picture, video, or audio recording, a copy of which is sold or offered for ultimate sale, licensed, distributed, broadcast, or otherwise exhibited, by adding that the recording must be a master recording and that the exhibition must be “for consideration”. [Note: This proposal is one of the Comptroller’s legislative proposals.] HB 2562 and SB 1962 would also amend Tax Code §151.3101 to exempt an admission to the championship game of the National Football League. 

HB 2751 (Raymond, Richard) would amend Tax Code §151.0033 to provide that taxable cable television service does not include streaming video provided via the Internet or similar technology, regardless of the type of device used by the purchaser to receive the streaming video and would amend Tax Code §151.009 to provide that the definition of tangible personal property includes streaming video provided via the Internet or similar technology, regardless of the type of device used by the purchaser to receive the streaming video.

HB 3046 (Dale, Tony) would amend Tax Code §321.409, which currently allows a city to use a combined ballot proposition to lower or repeal any dedicated or special purpose municipal sales tax, and by the same proposition to raise or adopt any other dedicated or special purpose municipal sales tax. The bill would modify this section to allow it to apply to any municipal sales tax, rather than just dedicated or special purpose municipal sales taxes.

HB 3366 (Bohac, Dwayne) and SB 1539 (Watson, Kirk) would make the following changes: (1) modify several statutes to change a current tax exemption for amusement services and personal services provided through coin-operated machines that are operated by the consumer into a tax exclusion; (2) amend Tax Code §151.006(a)(1) by removing “with” from the statute to specify that the definition of “sale for resale” requires that a taxable item be acquired for the purpose of reselling it as a taxable item, rather than “with or as a taxable item”; (3) amend Tax Code §151.006(a)(5) to expand the resale allowance for tangible personal property that is allocated and billed as a direct or indirect cost with title transfer to all government entities under Tax Code §151.309 and to all organizations exempt under Tax Code §151.310, rather than just the federal government; (4) amend Tax Code §151.006(c) to add that, regardless of title transfer provisions, a sale for resale does not include the sale of taxable items to a purchaser performing a contract for any governmental entity or exempt organization, except certain enumerated federal agencies; (5) amend Tax Code §151.006 to specify that a sale for resale does not include the sale of tangible personal property that will be used, consumed, or expended in, or incorporated into, an oil or gas well by a purchaser who acquires the property to perform an oil well service taxable under Chapter 191; (6) amend Tax Code §151.338, which currently exempts services to repair, remodel, maintain or restore tangible personal property if such work is required by statute, ordinance, order, rule, or regulation of any commission, agency, court, or political, governmental, or quasi-governmental entity in order to protect the environment or to conserve energy, by exempting only the separately-stated labor charge for such services. [Note: This bill is one of the Comptroller’s legislative proposals.]

HB 3471 (Davis, Yvonne) would amend Tax Code §151.430 (Overpayment of Tax) to allow a person who files a producer’s report or a first purchaser’s report for gas production tax or oil production tax and who has overpaid sales tax to seek a sales tax credit against the severance tax report or file a refund claim.

HB 3549 (Wray, John) would add a new Tax Code §151.3502 exempting these services performed for a health care facility: (1) cleaning, janitorial, or custodial services performed inside the facility or (2) cleaning patient care equipment, tools, or devices. “Health care facility” has the meaning assigned by Section 108.002, Health and Safety Code.

HB 3875 (Springer, Drew) and SB 1713 (Uresti, Carlos) would make “marketplace providers” responsible for collecting Texas use tax. A marketplace provider is a person who: (1) facilitates the sale, lease or rental of tangible personal property between a retailer and a Texas consumer in any manner, including by the use of a catalog or Internet website; (2) directly or indirectly collects from a Texas purchaser the receipts from the sale, lease or rental of the retailer’s tangible personal property and transmits the amount to the retailer minus any fee for facilitating the transaction; and (3) is engaged in business in Texas. The marketplace provider is not required to collect the Texas use tax if the retailer collects the tax from the purchaser. SB 1713 would also make “referrers” responsible for collecting use tax. A referrer is a person who: (1) agrees to list a retailer’s tangible personal property in any forum; (2) receives a fee, commission or other consideration from the retailer; (3) transfers the purchaser to the retailer or the retailer’s Internet website by telephone, electronic link or other means to complete the sale, lease or rental; and (4) does not collect the receipts from the purchaser. SB 1713 would also add other provisions to make additional parties responsible for collecting the Texas use tax.

HB 4038 (Bohac, Dwayne) would amend Tax Code §151.359(a)(5) relating to qualifying data centers to provide that the term “qualifying job” includes a new employment position staffed by a third-party employer if a written contract exists between the third-party employer and a qualifying owner, qualifying operator, or qualifying occupant that provides that the employment position is permanently assigned to an associated qualifying data center. The change applies to all certified data centers, regardless of when the certification occurred.

HB 4054 (Murphy, Jim) would amend Tax Code §151.314(c-2) and (c-3) to specify that the exemption for bakery items applies “regardless of whether the item is heated by the consumer or seller” and to delete the requirement that, to qualify for exemption, bakery items must be sold without plates or other eating utensils.

HB 4207 (Swanson, Valoree) would repeal Tax Code §151.319(a), which currently exempts a newspaper sold or distributed by individual copy or by subscription.

Severance Taxes
HB 3201 (Darby, Drew) would amend Tax Code §202.056 to eliminate all references to a three-year inactive well and to delete dates for hydrocarbons produced from a well designated as a two-year inactive well, which would reinstate the two-year inactive well for eligibility for a 10-year severance tax exemption.

HB 3232 (Darby, Drew) would amend Tax Code §201.351 (gas production tax) and Tax Code §202.301 (oil production tax) to provide that no penalty is imposed if: (1) the delinquent tax results from the person’s filing of an amended producer’s or first purchaser’s report with the Comptroller for a timely filed original report; (2) the person paid the full amount of tax due as reported on the original report; (3) the additional tax due on the amended report does not exceed 25% of the tax due under the original report; and (4) the person files the amended report not later than 730 days after the date on which the original report was due and remits the full amount of the additional tax due as reported on the amended report. 

Texas Emission Reduction Plan (TERP)
HB 2682 (Reynolds, Ron) would amend Tax Code §151.0515 and Tax Code §152.0215 to extend the expiration date of the TERP surcharge from August 31, 2019 to August 31, 2025.

HB 3393 (Pickett, Joe) and HB 3479 (Pickett, Joe) would amend Tax Code §151.0515 and Tax Code §152.0215 to extend the expiration date of the TERP surcharge from August 31, 2019 to the last day of the state fiscal biennium containing the date marking five years from the U.S. Environmental Protection Agency’s certification designating each area in Texas as attainment or unclassifiable or approving a redesignation substitute making a finding of attainment for the area. The bill, however, would suspend the collection of the TERP surcharge from September 1, 2017 through August 31, 2025, but would terminate the suspension if, subject to the Comptroller’s verification, TCEQ determines that the balance in the TERP fund will fall below $500 million during a biennium.

Unclaimed Property
HB 2829 (Oliveira, Rene) would amend Chapter 74, Property Code, to authorize the Comptroller, or the Comptroller’s designee, to issue subpoenas for witnesses and for the production of relevant books, records, documents, papers, accounts, or other data, in whatever form, for audit, inspection, and copying as may be relevant or material to the inquiry being made. A subpoena could be directed to the unclaimed property holder, holder’s affiliate, agent or recordkeeper, custodian of records, or any other person that the Comptroller determines may provide assistance. [Note: This bill is one of the Comptroller’s legislative proposals.]

We look forward to providing you information during the 85th Texas legislative session that will assist you in your work. Please do not hesitate to contact one of our DMA professionals below should you have specific questions or requests. We will respond as promptly as possible.