JWB C.S.H.B. 495 75(R)BILL ANALYSIS


WAYS & MEANS
C.S.H.B. 495
By: Horn
3-17-97
Committee Report (Substituted)



BACKGROUND 

Section 23.12, Tax Code, specifies how a businesses' inventory is
appraised for tax purposes. Currently, a businesses' inventory is
appraised at the market value for which it would sell to a purchaser who
would continue the business.  The lack of data associated with this method
has led many companies to use unique methods of valuation that may
conflict with the methods used by appraisal districts.  

PURPOSE

This bill would change the method of appraisal for valuing a businesses'
inventory. 

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 Section 23.12(a), Tax Code, to define market value of
inventory as the cost to the owner plus, in the case of a manufacturer,
the cost of placing the property in its current condition, less accrued
physical, functional, and economic obsolescence. 

SECTION 2.Effective date: January 1, 1998; The change in law made by this
Act applies only to an appraisal of an inventory for ad valorem tax
purposes for a tax year that begins on or after the effective date of this
Act. 

SECTION 3.Emergency clause.

COMPARISON OF ORIGINAL TO SUBSTITUTE

H.B. 495 defines market value of inventory as price determined in
accordance with generally accepted accounting practices.  C.S.H.B. 495
defines market value of inventory as the cost to the owner plus, in the
case of a manufacturer, the cost of placing the property in its current
condition, less accrued physical, functional, and economic obsolescence.