TheDMAWay

Texas Legislative Update

by DMA Staff | Apr 13, 2017
DMA-Texas-Legislative-Update-April 6 2017

DuCharme, McMillen & Associates, Inc. (DMA) provides this update relating to the 85th Texas Legislature Regular Session.

BUDGET
Before the legislative session started, Comptroller Glenn Hegar estimated available revenue to be $104.9 billion. The Senate’s proposed budget in SB 1, as introduced, would have appropriated $103.6 billion in state general revenue, and the House’s proposed budget, as introduced, would have appropriated approximately $108.9 billion. The two houses were $5.3 billion apart.
 
SB 1, as engrossed, appropriates $106.3 billion in state general revenue, but the Senate balances the budget by deferring the required transfer of $2.5 billion in sales tax to the State Highway Fund to a date after the biennium ends. Last week, the House Appropriations Committee voted out a committee substitute of SB 1, which appropriates $105.4 billion in state general revenue, but the House balances the budget by using $2.5 billion from the Rainy Day Fund and by adding budget riders that would defer spending payments and that would generate revenue through a proposed tax amnesty and proposed acceleration of the sale of unclaimed securities by the Comptroller. The House’s proposed changes to the budget are not yet final because SB 1 is scheduled to be heard by the House on April 6, and the House will have to consider 401 proposed amendments to SB 1 that were pre-filed last week.

TAX BILLS THAT HAVE PASSED THE SENATE
SB 2 (Bettencourt, Paul) would make various changes, including modifying the ad valorem tax rollback rate from 8% to 5%. [Note: The committee substitute that was voted out by the Senate Finance Committee would have reduced the rollback rate to 4%, but a floor amendment modified it to 5%.]
 
SB 3 (Taylor, Larry) would create Education Savings Account (ESA) and Tax Credit Scholarship (TCS) programs that could be tapped by students who wish to exit the public school system to pursue other school options or by students who remain in the public school but need financial assistance. The tax portion of the bill would enact Chapter 230, Insurance Code, which would authorize an entity to apply for a credit against the entity's state premium tax liability on or with the tax return for the taxable year during which the qualifying contributions were made. The credit amount would be equal to the lesser of the amount of qualifying contributions made to the certified educational assistance organization (CEAO) or 50% of the entity’s state premium tax liability.  
 
SB 17 (Nelson, Jane) would require the Comptroller to reserve one-half of any future general revenue growth in each succeeding biennium that exceeds 5% and would use the reserve to incrementally reduce the franchise tax rates until the tax is eliminated. The franchise tax rate adjustments would begin January 1, 2020.
 
SB 330 (Rodriguez, Jose) would provide that qualifying agricultural land would continue to qualify for appraisal as qualified open-space land if either a veteran of the U.S. armed services or an individual who is less than 35 years old takes over the farming of the land.  
 
SB 448 (Burton) would require a chief appraiser to give notice and a 60-day opportunity to respond before cancelling a deferral or abatement of ad valorem taxes on the homestead of a person age 65 or older. [Note: HB 2028 (Goldman, Craig) is identical and was voted out of House Ways & Means Committee on March 29, 2017, and sent to Local & Consent Calendar.]
 
SB 550 (Campbell, Donna) would allow a franchise tax credit established for eligible costs and expenses incurred in the certified rehabilitation of certified historic structures, which are currently authorized to be sold or assigned, to be applied to offset a premium tax imposed under Chapter 221, 222, 223, or 224, Insurance Code. [Note: HB 1199 (Rodriguez, Justin) is identical and was voted out of the House Ways & Means Committee on March 22, 2017, and sent to Local & Consent Calendar.]
 
SB 559 (Hancock, Kelly) would modify provisions in Chapter 181, Tax Code, to specify that the miscellaneous gross receipts tax is imposed 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 is one of the Comptroller’s legislative proposals. HB 2281 (Darby, Drew) is similar and was voted out of the House Ways & Means Committee on April 5, 2017.]
 
SB 629 (Schwertner, Charles) would eliminate the 7% interest imposed on additional ad valorem tax that is due for the three preceding years if the open-space land designated for agricultural use is sold or the land is diverted to a nonagricultural use.
 
SB 717 (Taylor, Van) would require the reappraisal of property for ad valorem tax purposes if it is damaged after January 1 and if the Federal Emergency Management Agency estimates the damage sustained by the property to be 5% or greater. The bill would allow a property owner to refuse the reappraisal. [Note: HB 513 (Davis, Sarah) is identical and was voted out of the House Ways & Means Committee on March 29, 2017.]  
 
SB 730 (Bettencourt, Paul) would increase the qualifying amount for the taxable value of income-producing tangible personal property to be exempt from rendition and ad valorem tax from less than $500 to less than $2,500.
 
SB 731 (Bettencourt, Paul) would expand the eligibility for binding arbitration for ad valorem tax purposes 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 745 (Kolkhorst, Lois) would repeal Tax Code §151.057 (Services by Employees) and add the provisions therein to Tax Code §151.3502 to make the current tax exclusions into a tax exemption, which would shift the burden of proof to taxpayers. The bill would add these additional requirements to the provision on temporary help services: (1) the host employer may not rent, lease, purchase, or otherwise acquire or use the necessary supplies and equipment from the temporary employment service or from an entity that is part of the affiliated group of which the temporary employment service is also a member; and (2) the host employer has the sole right of direction and control over the temporary employee as necessary to conduct the host employer’s business or comply with any licensure, statutory, or regulatory requirements. [Note: This bill is one of the Comptroller’s legislative proposals.]
 
SB 1539 (Watson) would make various changes to Chapter 151, Tax Code, including the following: (1) 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; (2) 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; and (3) amend Tax Code §151.338, which currently exempts from sales taxes 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. The bill now provides that the changes made by the bill are a “clarification of existing law.”]
 
SB 1557 (Kolkhorst, Lois) would make various changes to Chapter 162, Tax Code, that would make a person liable for any gasoline or diesel fuel purchased tax free under the claim of export but sold in Texas. [Note: This bill is one of the Comptroller’s legislative proposals. HB 2925 (Shine, Hugh) is identical and was heard by the House Ways & Means Committee on April 5, 2017.]

SENATE FINANCE COMMITTEE
SB 275 (Watson, Kirk) would allow certain exempt organizations such as Goodwill to retain a portion of the state sales tax collected from the sale of donated goods for use by the organizations for specified job training and placement services. The Comptroller is to certify the organizations on or after September 1, 2019, and the retention of the state sales tax begins with taxes due on or after September 1, 2019. The committee voted out a committee substitute on April 3, 2017. [Note: HB 518 (Darby, Drew) is identical and was voted out of the Ways & Means Committee on March 29, 2017.] 
 
SB 929 (Hughes) would require county tax assessor-collectors to successfully complete at least 40 hours of continuing education courses on the assessment and collection of property taxes within one year of taking office. The committee voted out a committee substitute on March 30, 2017. [Note: HB 1719 (Thompson, Ed) is similar and was voted out of the House Ways & Means Committee on March 29, 2017, and sent to Local & Consent Calendar.]
 
SB 1083 (Perry) would provide that a taxable insurance service does not include a service performed by a certified public accountancy firm (as defined by Occupations Code §901.002) if less than 1% of the firm’s revenue in the calendar year is from services in Texas that would otherwise constitute a taxable insurance service as defined by the sales tax statute. The committee voted out the bill on March 29, 2017.
 
SB 1120 (Zaffirini) would amend Tax Code §162.014 to add “compressed natural gas” and “liquefied natural gas” to the list of fuels that are prohibited from being taxed by a political subdivision. The committee voted out the bill on April 3, 2017. [Note: This bill is one of the Comptroller’s legislative proposals. HB 1351 (Wray, John) is identical and was voted out of the House Ways & Means Committee on March 29, 2017.]
 
SB 1390 (Hinojosa) would change the return filing date for cigarette taxes filed by distributors from the last day of each month to the 25th day of each month and would exempt cigarettes that are labeled for experimental use purposes in compliance with 27 C.F.R. Section 40.232 and that are sold directly by a manufacturer to a research facility in this state. The committee voted out the bill on April 3, 2017, and recommended it for the Local & Uncontested Calendar.
 
SB 1767 (Buckingham, Dawn) would give the property owner the election to present the owner’s evidence and arguments before, after, or between the cases presented by the chief appraiser at the hearing held on the parties’ disagreement on the correction of the appraisal roll, or in an ARB protest hearing. The committee voted out the bill on April 3, 2017.

HOUSE WAYS & MEANS COMMITTEE
HB 486 (VanDeaver, Gary) would authorize a school district that has had its adopted ad valorem tax rate approved by a tax ratification election to lower its M&O rate, and then in future years increase it back to the previously approved rate without having to hold another tax ratification election. The committee voted out the bill on March 29, 2017.

HB 1300 (Springer, Drew) would provide that if a municipality uses revenue derived from the municipal hotel occupancy tax to create, maintain, operate, or administer an electronic tax administration system which is currently authorized by statute, the municipality must allow a person who is required to collect and remit the tax to retain not more than 1% of the collected tax as reimbursement to the person for the cost of collecting the tax. The committee voted out the bill on April, 5, 2017.

HB 1370 (Springer, Drew) would make several changes, including: (1) authorize cities, other local governmental entities, and counties to request from the Comptroller information by individual outlets of retailers doing business in their jurisdictions; (2) expand the list of taxpayers that the local jurisdictions may request from the Comptroller by lowering the threshold of annual state and local sales tax payment from $500 to $100; and (3) authorize the release of individual taxpayer information by repealing current provisions that require the Comptroller to only release information in the aggregate. The committee voted out a substitute bill and recommended it be sent to Local & Consent Calendar on March 29, 2017.

HB 1496 (Bonnen, Greg) would change the ratification election date for school districts (if the adopted ad valorem tax rate exceeds the rollback rate) to the first uniform election date prescribed by the Election Code that allows sufficient time to comply with other requirements of law. The committee voted out a substitute bill on March 22, 2017.

HB 1786 (Murphy, Jim) would equalize the interest rate that the state pays on tax refunds with the interest rate that is charged by the state on tax deficiencies. The interest rate change would apply to refunds of taxes due on reporting periods beginning September 1, 2019. The committee voted out the bill on March 29, 2017, and sent it to Local & Consent Calendar.

HB 1896 (Bohac, Dwayne) would provide that if a city or county imposes a new hotel occupancy tax or increases the tax rate for the hotel occupancy tax, the new tax or the increase in the tax rate would not apply to a room rented under an existing contract signed before the effective date of the tax or rate change. The committee voted out the bill on April 5, 2017.

HB 2126 (Button, Angie) would amend Tax Code §171.002 to clarify that the provision of telecommunications services, which excludes a taxable entity from being eligible for the lower franchise tax rate as a wholesaler or retailer, does not include the selling of telephone prepaid calling cards. The committee voted out the bill on April 5, 2017. [Note: This bill is one of the Comptroller’s legislative proposals.] 

HB 2253 (Darby, Drew) would amend Tax Code §42.43 to grant discretionary authority to the court that makes the final determination of appeal to determine the amount of ad valorem tax on which interest is calculated, but the amount may not be greater than the amount refunded and cannot be less than the difference between the minimum amount the taxpayer was required to pay to preserve the right to appeal under Section 42.08(b) and the amount of taxes for which the property owner is liable. The committee voted out a substitute bill on April 5, 2017.

HB 2989 (Bonnen, Dennis) would amend Tax Code §26.15(f), which currently authorizes an ad valorem tax refund if a correction decreases the tax liability of a property after tax payment, by specifying the refund must be given to the property owner who paid the tax. The committee voted out the bill on April 5, 2017, and recommended it for Local & Consent Calendar.

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.

Please do not hesitate to contact your local DMA office should you have specific questions or requests.