89R2078 RDS-D

By: Vasut H.B. No. 165

A BILL TO BE ENTITLED

AN ACT

relating to the elimination of ad valorem taxes and the creation of a joint interim committee on the elimination 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 elimination of ad valorem taxes.

(b) The joint interim committee on the elimination 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 November 1, 2025.

(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 of alternative methods of taxation to replace local tax revenue that will be lost when ad valorem taxes are eliminated.

(h) For each alternative method of taxation considered by the committee, the committee shall:

(1) consider whether political subdivisions that currently impose ad valorem taxes would have the authority to impose the proposed alternative tax;

(2) determine the average tax rate for the proposed alternative tax imposed by 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 elimination of ad valorem taxes;

(3) determine, if appropriate, the effect that broadening the application of the proposed alternative tax at the local level would have on the tax rates identified under Subdivision (2) of this subsection;

(4) identify whether tax revenue generated by the proposed alternative tax would require redistribution to offset disparities in available local tax revenue as a result of the elimination 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 elimination 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 November 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 the effective date of this section. 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.

(d) This section takes effect January 1, 2035.

SECTION 3. Except as otherwise provided by this Act, this Act takes effect September 1, 2025.