LEGISLATIVE BUDGET BOARD

Austin, Texas

FISCAL NOTE, 80TH LEGISLATIVE REGULAR SESSION

April 25, 2007

TO:	Honorable Steve Ogden, Chair, Senate Committee on Finance
FROM:	John S. O'Brien, Director, Legislative Budget Board
IN RE:	SB1162 by Estes (Relating to the ad valorem tax situs of certain portable drilling rigs and associated equipment.), As Introduced

No significant fiscal implication to the State is anticipated.

The bill would add Section 21.022 to the Tax Code to define "more than a temporary period" for purposes of establishing the taxable situs (location) of portable drilling rigs.

Under the bill, a portable drilling rig would be considered taxable by each taxing unit in which the rig is located on January 1, if the rig was located in the appraisal district for the taxing unit for 10 consecutive days preceding January 1.

If the drilling rig was not located in the appraisal district where it was located on January 1 for the preceding 10 days, it would be taxable by each taxing unit in which the owner's principal place of business in the state was located on January 1.

The bill would repeal Section 21.02(e), which determines the taxable situs of portable drilling rigs. Current law provides that a portable drilling rig is taxable by a taxing unit in which the drilling rig is located on January 1, if the rig was located in the appraisal district that appraised property for the unit for the preceding 365 days. If the drilling rig was not located in the appraisal district for the preceding 365 days, the rig is taxable at the owner's principal place of business.

Because the state is constitutionally prohibited from imposing a state property tax, there would be no direct fiscal impact on the state; however, Section 403.302 of the Government Code requires the Comptroller to conduct a property value study to determine the total taxable value for each school district. Total taxable value is an element in the state's school funding formula. Passage of this bill could cause a change in school district taxable values reported to the Commissioner of Education by the Comptroller.

The bill would take effect January 1, 2008.

Local Government Impact

Passage of this bill would, in some circumstances, change the taxable situs of portable drilling rigs. Revenue currently collected by some taxing units would be collected by other taxing units. The Comptroller's Property Tax Division does not receive or maintain information from tax offices that would be helpful in determining the impact of this bill on units of local government.

Source Agencies:

304 Comptroller of Public Accounts

LBB Staff:

JOB, CT, SD, SJS