SRC-JXG S.B. 1415 76(R)   BILL ANALYSIS


Senate Research Center   S.B. 1415
By: Shapiro
Finance
4/9/1999
As Filed


DIGEST 

In 1988, the comptroller's office created the property management company
exemption, after the sales tax base was broadened to include certain
services provided by a property management company to a commercial property
owner. This exemption provides that the property management company's
employees are considered to be employees of the rental property. The
comptroller's audit division (division) provides that favorable tax
treatment is not available for a property management company's employees,
if a parent corporation or an affiliated entity provides consolidated
payroll, employee benefits, and administration. The division's position
penalizes business operations, and taxes property management companies
differently who provide the same services, depending solely on whether
payroll and benefits administration was out sourced to a third party; done
on a consolidated basis; or separately prepared by each legal entity. S.B.
1415 would provide statutory basis for the existing property management
company exemption and would clarify the consolidation of payroll and
benefits administration. 

PURPOSE

As proposed, S.B. 1415 defines "real property service" and "property
management company." 

RULEMAKING AUTHORITY

This bill does not grant any additional rulemaking authority to a state
officer, institution, or agency. 

SECTION BY SECTION ANALYSIS

SECTION 1. Amends Section 151.0048, Tax Code, by adding Subsections (d) and
(e), to define "real property service" to mean that the definition does not
include a service listed under Subsection (a), if the service is performed
by an employee permanently assigned to one rental property by a property
management company and the property management company is reimbursed by the
property owner on a dollar-for-dollar basis. Provides that an employee
permanently assigned to one rental property is considered an employee of
that property, if the employee remains assigned to the property while
employed by successive owner or management companies. Provides that an
individual is treated as an employee of the property management company or
an affiliate of the property management company if certain conditions
exist. Requires the property management company to collect tax on a service
listed under Subsection (a), if the service is performed by the same
employee for other properties. Provides that the management company owes
tax on the purchase price of all taxable items purchased and provided to
employees providing services on managed rental property. Defines "property
management company" to mean a person who, for consideration, operates and
manages all the activities at a property held by the owner for purposes of
rental, including an office building, mall, or other retail or office
complex, an apartment complex, a duplex, or a home, and whose
responsibilities include securing tenants, hiring and supervising employees
for operation or upkeep of the property, receiving and applying revenues,
and incurring and paying expenses derived from the operation of the
property as directed by the owner. 

SECTION 2. Effective date: on the first day of the first calendar quarter
beginning on or after the date that it may take effect under Section 39,
Article III, Texas Constitution. Makes application of this Act prospective. 

SECTION 3. Emergency clause