SB 2 (Bettencourt/Burrows) relating to ad valorem taxation, also referred to as the property tax reform bill was sent to the Governor on 5/28. The bill was passed out of Senate committee earlier in the legislative session but could not get the votes needed to be brought to the Senate floor for discussion. There were rumors of Lt. Gov. Patrick resorting to the “nuclear option” in early April which would suspend certain procedures and require only a simple majority of votes to bring up the bill. SB 2 was passed out of the Senate chamber on April 15 without using a “nuclear option”. The bill was eventually passed out of the House as well on May 1 as amended and substituted and members spent the final weeks of session working on the differences.
Rep. Burrows noted when he laid out the conference committee report for adoption in the House chamber that the bill will be referred to as the “Texas Property Tax Reform and Transparency Act 2019.” The bill makes several reforms to the process and also implements new rollback rate reductions, down to 2.5 percent for school districts and 3.5 percent for cities and counties. Provisions include:
- 5% rollback for cities and counites, 2.5% for school districts
- Effective rate renamed “no-new-revenue” tax rate
- Rollback rate referred to as “voter-approval” tax rate
- Uniform appraisal methods and techniques
- Posting of tax-related information on website/Delivery of certain notices by e-mail
- Establishes a Property Tax Administration Advisory Board to advise the comptroller improving the effectiveness and efficiency of the property tax system
- Sets a De minimis amount
- Allows for banking/unused increment rate
HB 1525 (Burrows/Nelson) Relating to the administration and collection of sales and use taxes applicable to sales involving marketplace providers/online sales and use tax was signed by the Governor on 5/24 and becomes effective on 10/1. The comptroller would have rulemaking authority for implementation of the added section, including authority by rule to except certain marketplace providers from some or all of the requirements of the section. The estimated positive fiscal impact is $550 million through the biennium ending Aug. 31, 2021.
HB 492/HJR 34 (Shine/Bettencourt) proposing a constitutional amendment authorizing the legislature to provide for a temporary local option exemption from ad valorem taxation of a portion of the appraised value of certain property damaged by a disaster was sent to the Governor on 5/29. The bill is the enabling legislation for HJR 34, which allows for income-producing personal property and improvements to real property to qualify for a property tax exemption.
HB 1136 (Price/Nelson) Relating to a common characteristic or use project in a public improvement district established by a municipality was sent to the Governor 5/24. The bill allows any municipality in Texas to create a tourism public improvement district (TPID) composed entirely of hotels in the city and funded solely with a self-assessed fee.
HB 3356 (Bucy/Schwertner) Relating to the use of municipal hotel occupancy tax revenue in certain municipalities was sent to the Governor on 5/21.
HB 4174 (Leach/Kolkhorst) Relating to the nonsubstantive revision of the event reimbursement programs, including the Pan American Games trust fund and the Olympic Games trust fund, was signed by the Governor on 5/29. The bill becomes effective on 4/1/2021.
HB 2129 and HB 2438 both proposed extending Chapter 313 program for another 10 years but since neither bill passed, the 87th will need to reauthorize Chapter 313 for its continuation.
HB 3143 (Murphy/West) Relating to the Property Redevelopment and Tax Abatement Act reauthorized Chapter 312 until 2029.
HJR 38 (Leach/Fallon) Proposing a constitutional amendment prohibiting the imposition of an individual income tax was filed with the Secretary of State on 5/24. Some pointed out during debate of the resolution that a possible issue arises due to the use of the term “individual” in place of “natural person”. According to the fiscal impact statement by the Legislative Budget Board, the term could open the door to legal challenges of the franchise tax. “The term ‘individuals’ is not defined and could be interpreted to include entities that are currently subject to the state’s franchise tax,” it reads.
There are places in state law where the definition of “person” includes a corporation or other business interest. The Comptroller’s biennial revenue estimate projects that franchise tax will bring in more than $6 billion in revenue over the next two years, so a court ruling exempting some, or all, businesses from the franchise tax could introduce a significant deficit into the budget.
In response, Fallon emphasized that his proposal could only apply to personal income taxes. “The legislative intent of HJR 38 is that an individual is just like what it sounds: a single human being,” he said. “There’s no case law we can find where an individual is described by anything other than a single human being.” More than that, he said, the amendment couldn’t apply to the franchise tax. “The margins tax is not an income tax, the margins tax is a tax on gross margins,” said Fallon.
