BILL ANALYSIS



C.S.H.J.R. 107
By: Rusling
May 2, 1995
Committee Report (Substituted)


BACKGROUND

Section 11.251, Tax Code, and Article VIII, Section 1-j, Texas
Constitution, provide for a freeport exemption.  Goods, wares, ores
and merchandise qualify for an exemption from ad valorem taxation
if they leave Texas within 175 days of the date they were brought
into or acquired in the state.  This is a local option exemption,
and the exemption does not apply to oil, gas and petroleum
products.

Oklahoma has a 270 day exemption on inventory, and some states do
not tax warehouse inventories at all.  This may place some states
at an advantage in attracting warehouse distribution centers.

PURPOSE

This resolution would amend the Texas Constitution to provide for
a property tax exemption for certain goods held for transit at a
location for 270 days or less.

RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not expressly
grant any additional rulemaking authority to a state officer,
department, agency or institution.

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Article VIII, Texas Constitution, by adding
Section 1-m as follows:

     (a) Exempts certain goods from ad valorem taxation if the
property is acquired in or    imported into this state to be
detained for assembling, storing, manufacturing, processing      or fabricating purposes, and then forwarded to another
location in 270 days or less.

     (b) Provides that Subsection (a) does not apply to a school
district.

     (c) Provides for clarification of the meanings of property
references used in this  section regarding aircraft and aircraft
parts.

     (d) Allows local election to impose ad valorem tax on property
otherwise exempt under   Subsection (a).  Allows subsequent action
by local governing entity to adopt the  exemption for following
years.

SECTION 2.  Repeals Section 1-j (Certain Tangible Personal Property
Exempt from Ad Valorem Taxation), Article VIII, Texas Constitution.

SECTION 3.  Amends Article VIII, Texas Constitution, by adding
Section 1-m-1 to establish an effective date of January 1, 1996. 
This section expires January 1, 1997.

SECTION 4. Establishes election date on November, 7, 1995, and
specifies ballot language.

COMPARISON OF ORIGINAL TO SUBSTITUTE

The committee substitute eliminates school districts from the
expanded exemption; creates a local option to tax the inventory
otherwise exempt; and allows local elected officials the option to
restore the exemption beginning in a subsequent year.  The original
joint resolution did not contain such provisions.

The committee substitute also repeals Section 1-j (Certain Tangible
Personal Property Exempt from Ad Valorem Taxation), Article VIII,
Texas Constitution.  H.J.R. 107 did not repeal this section.

SUMMARY OF COMMITTEE ACTION

Public notice was posted in accordance with the rules, and a public
hearing was held on April 11, 1995.  Representative Rusling
explained the bill.  Without objection, the resolution was left
pending before the committee.

On April 27, 1995, the committee met in a formal meeting and
considered H.J.R. 107 on pending business.  The committee
considered a committee substitute by Representative Craddick. 
Without objection, C.S.H.J.R. 107 was adopted.  By a record vote of
8 ayes, 0 nays, 0 present not voting, and 3 absent, the committee
voted to report H.J.R. 107 to the House as substituted with the
recommendation that it do pass.

     For purposes of testimony, the committee considered H.B. 2608
and H.J.R. 107 together.      
     The following persons testified in favor of one or more of the
bills (4/11/95):
           
           Jon W. Spelman, representing the Texas Assn. of Realtors
(HB 2608)
           Curtis Cleveland, representing himself and the Texas
Economic Development                      Council (HB 2608)
           Phyllis Coffin, representing MCI Telecommunications
Corp. (HB 2608, HJR 107)
           Bob Vetters, representing himself (HB 2608)
           Thomas A. Leiser, representing himself and Trammell Crow
Co., Texas            Warehousman's Assn. (HB 2608)

     The following persons testified against one or more of the
bills (4/11/95):

           Maxie L. Paterson, representing himself and the City of
Houston (HB 2608)
           Wally Hatch, representing the Texas Municipal League (HB
2608, HJR 107)