SRC-TJG H.B. 104 78(R)   BILL ANALYSIS


Senate Research Center   H.B. 104
78R8039 JD-DBy: Chavez (Duncan)
Finance
5/7/2003
Engrossed


DIGEST AND PURPOSE 

Under current law, certain tangible personal property is exempt from ad
valorem taxation if the property is detained in this state for assembling,
storing, manufacturing, processing, or fabricating purposes by the person
who acquired or imported the property. However, property that would
otherwise be exempt, such as warehouse inventory, is subject to taxation
by the state which may place the Texas warehousing industry at a
competitive disadvantage to similar industries in neighboring states or
across the border.  H.B. 104 authorizes the legislature to exempt tangible
personal property that consists of goods-in-transit from ad valorem
taxation.  

RULEMAKING AUTHORITY

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

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Subchapter B, Chapter 11, Tax Code, by adding Section
11.253, as follows: 

Sec. 11.253.  TANGIBLE PERSONAL PROPERTY IN TRANSIT.  (a) Defines
"dealer's motor vehicle inventory," "goods-in-transit," "location," and
"petroleum product." 

(b) Provides that a person is entitled to an exemption from taxation of
the appraised value of that portion of the person's property that consists
of goods-intransit. 

(c) Provides that the exemption provided by Subsection (b) is subtracted
from the market value of the property determined under Section 23.01 or
23.12, as applicable, to determine the taxable value of the property. 

(d) Requires the chief appraiser, except as provided by Subsections (f)
and (g), to determine the appraised value of goods-in-transit under this
subsection.  Requires the chief appraiser to determine the percentage of
the market value of tangible personal property owned by the property owner
and used for the production of income in the preceding calender year that
was contributed by goods-in-transit. Requires the chief appraiser, for the
first year in which the exemption applies to a taxing unit, to determine
that percentage as if the exemption applied in the preceding year.
Requires the chief appraiser to apply that percentage to the market value
of the property owner's tangible personal property used for the production
of income for the current year to determine the appraised value of
goods-in-transit for the current year. 

(e) Requires the chief appraiser, in determining the market value of
goods-intransit that in the preceding year were assembled, stored,
manufactured, processed, or fabricated in this state, to exclude the cost
of equipment, machinery, or materials that entered into and became
component parts of the goods-in-transit or that were not transported to
another location in this state or outside this state before the expiration
of 175 days after the date they were brought into this state by  the
property owner or acquired by the property owner in this state.
Authorizes the chief appraiser, for component parts held in bulk, to use
the average length of time a component part was held by the owner of the
component parts during the preceding year at a location in this state that
was not owned by or under the control of the owner of the component parts
in determining whether the component parts were transported to another
location in this state or outside this state before the expiration of 175
days. 

(f) Requires the chief appraiser, if the property owner was not engaged in
transporting goods-in-transit to another location in this state or outside
this state for the entire preceding year, to calculate the percentage of
the market value described in Subsection (d) for the portion of the year
in which the property owner was engaged in transporting goods-in-transit
to another location in this state or outside this state. 

(g) Requires the chief appraiser, if the property owner or the chief
appraiser demonstrates that the method provided by Subsection (d)
significantly understates or overstates the market value of the property
qualified for an exemption under Subsection (b) in the current year, to
determine the market value of the goods-intransit to be exempt by
determining, according to the property owner's records and any other
available information, the market value of those goods-in-transit owned by
the property owner on January 1 of the current year, excluding the cost of
equipment, machinery, or materials that entered into and became component
parts of the goods-in-transit but were not themselves goods-in-transit or
that were not transported to another location in this state or outside
this state before the expiration of 175 days after the date they were
brought into this state by the property owner or acquired by the property
owner in this state. 

(h) Authorizes the chief appraiser by written notice delivered to a
property owner who claims an exemption under this section to require the
property owner to provide copies of property records so the chief
appraiser can determine the amount and value of goods-in-transit and that
the location in this state where the goods-in-transit were detained for
assembling, storing, manufacturing, processing, or fabricating purposes
was not owned by or under the control of the owner of the
goods-in-transit.  Provides that if the property owner fails to deliver
the information requested in the notice before the 31st day after the date
the notice is delivered to the property owner, the property owner forfeits
the right to claim or receive exemption for that year. 

(i) Provides that property that meets the requirements of this section
constitutes goods-in-transit regardless of whether the person who owns the
property on January 1 is the person who transports it to another location
in this state or outside this state. 

(j) Authorizes the governing body of a taxing unit, in the manner required
for official action by the governing body, to provide for the taxation of
goods-intransit exempt under Subsection (b) and not exempt under other
law.  Requires the official action to tax the goods-in-transit to be taken
before January 1 of the first tax year in which the governing body
proposes to tax goods-in-transit.  Requires the governing body of the
taxing unit, before acting to tax the exempt property, to conduct a public
hearing as required by Section 1-n(d), Article VIII, Texas Constitution,
as proposed by S.J.R. No. 6, 77th Legislature, Regular Session, 2001.
Provides that if the governing body of a taxing unit provides for the
taxation of the goods-in-transit as provided by this subsection, the
exemption prescribed by Subsection (b) does not apply to that unit.
Provides that the goodsin-transit remain subject to taxation by the taxing
unity until the governing body of the taxing unit, in the manner required
for official action, rescinds or repeals its previous action to tax
goods-in-transit, or otherwise determines that the exemption prescribed by
Subsection (b) will apply to that taxing unit. 
 
(k) Provides that a property owner who receives the exemption from
taxation provided by Subsection (b) is not eligible to receive the
exemption from taxation provided by Section 11.251 for the same property. 

SECTION 2.  Amends Section 26.012(15), Tax Code, to make a conforming and
a nonsubstantive change. 

SECTION 3.  Amends Section 403.302(d), Government Code, to make a
conforming change. 

SECTION 4.  Effective date: January 1, 2004.
            Makes application of this Act prospective.