By:  Ellis                                                        S.B. No. 1199


A BILL TO BE ENTITLED

AN ACT



relating to the deposit of municipal sales and use taxes into a tax 
increment fund.
	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:                        
	SECTION 1.  Chapter 311, Tax Code, is amended by adding 
Section 311.0123 to read as follows:
	Sec. 311.0123.  SALES TAX INCREMENT.  (a)  In this section, 
"sales tax base" for a reinvestment zone means the amount of 
municipal sales and use taxes attributable to the zone for the year 
in which the zone was designated under this chapter.
	(b)  The governing body of a municipality may determine, in 
an ordinance designating an area as a reinvestment zone or in an 
ordinance adopted subsequent to the designation of a zone, the 
portion or amount of tax increment generated from municipal sales 
and use taxes attributable to the zone, above the sales tax base, to 
be deposited into the tax increment fund.  Nothing in this section 
requires a municipality to contribute sales tax increment into a 
tax increment fund.
	(c)  Before the issuance of a bond, note, or other obligation 
under this chapter that pledges the payments into the tax increment 
fund under Subsection (b), the governing body of a municipality may 
enter into an agreement, under Subchapter E, Chapter 271, Local 
Government Code, to authorize and direct the comptroller to:
		(1)  withhold from any payment to which the 
municipality may be entitled the amount of the payment into the tax 
increment fund under Subsection (b);
		(2)  deposit that amount into the tax increment fund; 
and            
		(3)  continue withholding and making additional 
payments into the tax increment fund until an amount sufficient to 
satisfy the amount due has been met.
	(d)  A local government corporation created under Chapter 
431, Transportation Code, that has contracted with a reinvestment 
zone and a municipality under Section 311.010(f) may be a party to 
an agreement under Subsection (c) and the agreement may provide for 
payments to be made to a paying agent of the local government 
corporation.
	(e)  The sales and use taxes to be deposited into the tax 
increment fund under this section may be disbursed from the fund 
only to:
		(1)  satisfy claims of holders of tax increment bonds, 
notes, or other obligations issued for the reinvestment zone;
		(2)  pay project costs for the zone; and                               
		(3)  make payments in accordance with an agreement made 
under Section 311.010(b) dedicating revenue from the tax increment 
fund.
	SECTION 2.  Section 311.015, Tax Code, is amended by adding 
Subsection (i-1) to read as follows:
	(i-1)  A municipality's obligation to deposit sales and use 
taxes into the tax increment fund is not a general obligation of the 
municipality.  An obligation to make payments from sales and use 
taxes under Section 311.0123 does not give rise to a charge against 
the general credit or taxing powers of the municipality and is not 
payable except as provided by this chapter.  A tax increment bond or 
note issued under this chapter that pledges payments made under 
Section 311.0123 must state the restrictions of this subsection on 
its face.
	SECTION 3.  This Act takes effect immediately if it receives 
a vote of two-thirds of all the members elected to each house, as 
provided by Section 39, Article III, Texas Constitution.  If this 
Act does not receive the vote necessary for immediate effect, this 
Act takes effect September 1, 2005.