1-1     By:  Duncan, Zaffirini, Fraser                         S.B. No. 174
 1-2           (In the Senate - Filed December  15, 2000; January 11, 2001,
 1-3     read first time and referred to Committee on Finance;
 1-4     April 24, 2001, reported adversely, with favorable Committee
 1-5     Substitute by the following vote:  Yeas 11, Nays 0; April 24, 2001,
 1-6     sent to printer.)
 1-7     COMMITTEE SUBSTITUTE FOR S.B. No. 174                   By:  Duncan
 1-8                            A BILL TO BE ENTITLED
 1-9                                   AN ACT
1-10     relating to the exemption from ad valorem taxation of tangible
1-11     personal property held at certain locations only temporarily for
1-12     assembling, manufacturing, processing, or other commercial
1-13     purposes.
1-14           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-15           SECTION 1.  Subchapter B, Chapter 11, Tax Code, is amended by
1-16     adding Section 11.252 to read as follows:
1-17           Sec. 11.252.  TANGIBLE PERSONAL PROPERTY IN TRANSIT.  (a)  In
1-18     this section, "goods-in-transit" means property that is exempt from
1-19     taxation under Section 1-n, Article VIII, Texas Constitution.
1-20           (b)  A person is entitled to an exemption from taxation of
1-21     the appraised value of that portion of the person's property that
1-22     consists of goods-in-transit.
1-23           (c)  The exemption provided by Subsection (b) is subtracted
1-24     from the market value of the property determined under Section
1-25     23.01 or 23.12, as applicable, to determine the taxable value of
1-26     the property.
1-27           (d)  Except as provided by Subsections (f) and (g), the chief
1-28     appraiser shall determine the appraised value of goods-in-transit
1-29     under this subsection.  The chief appraiser shall determine the
1-30     percentage of the market value of inventory or other property owned
1-31     by the property owner in the preceding calendar year that was
1-32     contributed by goods-in-transit.  For the first year to which the
1-33     exemption applies to a taxing unit, the chief appraiser shall
1-34     determine that percentage as if the exemption applied to the
1-35     preceding year.  The chief appraiser shall apply that percentage to
1-36     the market value of the property owner's inventory or other
1-37     property for the current year to determine the appraised value of
1-38     goods-in-transit for the current year.
1-39           (e)  In determining the market value of goods-in-transit that
1-40     in the preceding year were assembled, manufactured, repaired,
1-41     maintained, processed, or fabricated in this state or used by the
1-42     person who acquired or imported the property in the repair or
1-43     maintenance of aircraft operated by a certificated air carrier, the
1-44     chief appraiser shall exclude the cost of equipment, machinery, or
1-45     materials that entered into and became component parts of the
1-46     goods-in-transit but were not themselves goods-in-transit or that
1-47     were not transported to another location in this state or out of
1-48     this state before the expiration of 270 days after the date they
1-49     were brought into this state by the property owner or acquired by
1-50     the property owner in this state.  For component parts held in
1-51     bulk, the chief appraiser may use the average length of time a
1-52     component part was held by the owner of the component parts during
1-53     the preceding year at a location in this state that was not owned
1-54     or under the control of the owner of the component parts in
1-55     determining whether the component parts were transported to another
1-56     location in this state or out of this state before the expiration
1-57     of 270 days.
1-58           (f)  If the property owner was not engaged in transporting
1-59     goods-in-transit to other locations in this state or out of this
1-60     state for the entire preceding year, the chief appraiser shall
1-61     calculate the percentage of the market value described in
1-62     Subsection (d) for the portion of the year in which the property
1-63     owner was engaged in transporting goods-in-transit to another
1-64     location in this state or out of this state.
 2-1           (g)  If the property owner or the chief appraiser
 2-2     demonstrates that the method provided by Subsection (d)
 2-3     significantly understates or overstates the market value of the
 2-4     property qualified for an exemption under Subsection (b) in the
 2-5     current year, the chief appraiser shall determine the market value
 2-6     of the goods-in-transit to be exempt by determining, according to
 2-7     the property owner's records and any other available information,
 2-8     the market value of those goods-in-transit owned by the property
 2-9     owner on January 1 of the current year, excluding the cost of
2-10     equipment, machinery, or materials that entered into and became
2-11     component parts of the goods-in-transit but were not themselves
2-12     goods-in-transit or that were not transported to another location
2-13     in this state or out of this state before the expiration of 270
2-14     days after the date they were brought into this state by the
2-15     property owner or acquired by the property owner in this state.
2-16           (h)  The chief appraiser by written notice delivered to a
2-17     property owner who claims an exemption under this section may
2-18     require the property owner to provide copies of property records to
2-19     determine the amount and value of goods-in-transit and whether the
2-20     location in this state where the goods-in-transit were detained for
2-21     assembling, storing, manufacturing, processing, or fabricating
2-22     purposes was not owned or under the control of the owner of the
2-23     goods-in-transit.  If the property owner fails to deliver the
2-24     information requested in the notice before the 31st day after the
2-25     date the notice is delivered to the property owner, the property
2-26     owner forfeits the right to claim or receive the exemption for that
2-27     year.
2-28           (i)  For the purposes of Section 1-n, Article VIII, Texas
2-29     Constitution, "petroleum products" means liquid and gaseous
2-30     materials that are the immediate derivatives of the refining of oil
2-31     or natural gas.
2-32           (j)  Property that meets the requirements of Section 1-n(a),
2-33     Article VIII, Texas Constitution, constitutes goods-in-transit
2-34     regardless of whether the person who owns the property on January 1
2-35     is the person who transports it to another location in this state
2-36     or out of this state.
2-37           (k)  The governing body of a taxing unit, in the manner
2-38     required for official action by the governing body, may provide for
2-39     the taxation of tangible personal property exempt under Subsection
2-40     (b) and not exempt under other law.  Before acting to tax the
2-41     exempt property, the governing body of the taxing unit must conduct
2-42     a public hearing as required by Section 1-n(d), Article VIII, Texas
2-43     Constitution.  If the governing body of a taxing unit provides for
2-44     the taxation of the personal property as provided by this
2-45     subsection, the exemption prescribed by Subsection (b) does not
2-46     apply to that unit.
2-47           (l)  This section expires August 31, 2003.
2-48           SECTION 2.  Subsection (a), Section 11.437, Tax Code, is
2-49     amended to read as follows:
2-50           (a)  A person who operates a warehouse used primarily for the
2-51     storage of cotton for transportation to another location in this
2-52     state or outside of this state may apply for an exemption under
2-53     Section 11.251 or 11.252 for cotton stored in the warehouse on
2-54     behalf of all the owners of the cotton.  An exemption granted under
2-55     this section applies to all cotton stored in the warehouse that is
2-56     eligible to be exempt under Section 11.251 or 11.252.  Cotton that
2-57     is stored in a warehouse covered by an exemption granted under this
2-58     section and that is transported to another location in this state
2-59     or outside of this state is presumed to have been transported to
2-60     another location in this state or outside of this state within the
2-61     time permitted by Section 1-j or 1-n, Article VIII, [Section 1-j,
2-62     of the] Texas Constitution, for cotton to qualify for an exemption
2-63     under that section.
2-64           SECTION 3.  Subsection (e), Section 22.01, Tax Code, is
2-65     amended to read as follows:
2-66           (e)  Notwithstanding Subsections (a) and (b), a person is not
2-67     required to render for taxation cotton that:
2-68                 (1)  the person manages and controls as a fiduciary;
2-69                 (2)  is stored in a warehouse for which an exemption
 3-1     for cotton has been granted under Section 11.437 [11.436]; and
 3-2                 (3)  the person intends to transport to another
 3-3     location in this state or outside of this [the] state within the
 3-4     time permitted by Section 1-j or 1-n, Article VIII, [Section 1-j,
 3-5     of the] Texas Constitution, for cotton to qualify for an exemption
 3-6     under that section.
 3-7           SECTION 4.  This Act takes effect January 1, 2002, and
 3-8     applies only to taxes imposed for a tax year beginning on or after
 3-9     that date, but only if the constitutional amendment proposed by the
3-10     77th Legislature, Regular Session, 2001, to exempt from ad valorem
3-11     taxation tangible personal property held at certain locations only
3-12     temporarily for assembling, manufacturing, processing, or other
3-13     commercial purposes, takes effect.  If that amendment is not
3-14     approved by the voters, this Act has no effect.
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