LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE
74th Regular Session
April 11, 1995
TO: Honorable Tom Craddick, Chair IN RE: House Bill No. 2608
Committee on Ways & Means By:Rusling, Averitt
House of Representatives
Austin, Texas
FROM: John Keel, Director
In response to your request for a Fiscal Note on House Bill No.
2608 (Relating to the exemption from ad valorem taxation of
tangible personal property acquired in or imported into the state
for transportation or distribution to another location.) this
office has determined the following:
The bill would provide for a new exemption for "inventory held
for distribution." To qualify, the goods must be assembled,
manufactured, stored, processed, or fabricated while in Texas.
Oil and gas and their immediate derivatives are not exemptable.
In addition, the inventory must be transported or distributed to
another location, not later than 270 days after the property is
acquired in or imported into the state.
Currently Article VIII, Section 1-j, Texas Constitution, and
Section 11.251, Tax Code, provide for a "freeport exemption."
This exemption, which may be granted at the option of each city,
county, school district, or junior college district, exempts
goods, wares, ores, raw materials, and other types of inventory
that are brought into or acquired in the state and transported
out of the state within 180 days of acquisition.
The bill bypasses the local option to grant a "freeport
exemption." The same types of property would be covered by the
new exemption, except that property transported out of state
within 270 days of acquisition would qualify. There is no local
option to continue taxing the property.
The bill would be effective January 1, 1996, contingent on the
passage of a constitutional amendment authorizing the exemption,
such as House Joint Resolution 107.
The proposed new exemption would cause significant revenue losses
to taxing units which do not grant the freeport exemption, and
would increase losses for those that already grant the exemption.
The Comptroller's office estimates that this exemption would
lower statewide taxable value by $17.6 billion in 1996.
There would also be substantial value and levy losses to cities
and special districts. These amounts cannot be estimated due to
lack of detailed data.
Total taxable value is an element in the state's school funding
formula. Passage of this bill would cause a reduction in school
district taxable values certified to the Commissioner of
Education by the Comptroller. The taxable value decrease was
converted to a state cost by a multiplier of .013 provided by the
Education Agency.
County levy loss is calculated by multiplying the county value
loss by an average statewide tax rate of $0.45 per $100 of
valuation.
The probable fiscal implication of implementing the provisions of
the bill during each of the first five years following passage
is estimated as follows:
Fiscal Probable Cost Out Probable Loss to Probable Loss to
Year of General School Districts Counties
Revenue Fund 001
1996 $0 $237,742,178 $82,296,369
1997 0 240,713,955 83,324,061
1998 243,722,879 243,722,879 84,365,612
1999 246,769,415 246,769,415 85,420,182
2000 249,854,033 249,854,033 86,487,935
Similar annual fiscal implications would continue as long as the
provisions of the bill are in effect.
Source: Comptroller of Public Accounts
LBB Staff: JK, BR, DF