84R9029 TJB-F

By: Ellis S.B. No. 868

A BILL TO BE ENTITLED

AN ACT

relating to a periodic review and expiration dates of state and local tax preferences.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Subtitle B, Title 3, Government Code, is amended by adding Chapter 320A to read as follows:

CHAPTER 320A. REVIEW OF STATE AND LOCAL TAX PREFERENCES

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 320A.001. DEFINITION. In this chapter, "tax preference" means a credit, discount, exclusion, exemption, refund, special valuation, special accounting treatment, special rate, or special method of reporting authorized by state law that relates to a state or local tax imposed in this state.

SUBCHAPTER B. SCHEDULE FOR PERIODIC REVIEW OF STATE AND LOCAL TAX

PREFERENCES

Sec. 320A.051. DEVELOPMENT AND BIENNIAL MODIFICATION OF STATE AND LOCAL TAX PREFERENCE REVIEW SCHEDULE. (a) The comptroller shall:

(1) identify each state tax preference and each type of local tax preference;

(2) develop a state and local tax preference review schedule under which each identified tax preference is reviewed once during each six-year period; and

(3) specifically identify on the schedule each of the tax preferences the Legislative Budget Board must review for purposes of the next report due under Section 320A.151.

(b) Except as provided in Subsection (c), in developing the schedule, the comptroller shall give priority to scheduling for review the tax preferences that result in the greatest reduction in revenue derived from the taxes to which the tax preferences relate.

(c) In developing the schedule, the comptroller may:

(1) schedule for review at the same time all tax preferences authorized in the same chapter of the Tax Code; and

(2) schedule the initial review of a tax preference that has an expiration date for any date the comptroller determines is appropriate.

(d) The comptroller shall revise the schedule biennially only to:

(1) add to the schedule a tax preference that was enacted or authorized after the comptroller developed the most recent schedule;

(2) delete from the schedule a tax preference that was repealed or that expired after the comptroller developed the most recent schedule;

(3) update the review dates of the tax preferences for which reviews were conducted after the comptroller developed the most recent schedule; and

(4) update the tax preferences identified under Subsection (a)(3).

Sec. 320A.052. PUBLIC COMMENT. The comptroller shall provide a process by which the public may comment on the state and local tax preference review schedule under Section 320A.051. The comptroller shall consider those comments in developing or revising the schedule.

Sec. 320A.053. SCHEDULE PROVIDED TO LEGISLATIVE BUDGET BOARD. Not later than December 1 of each odd-numbered year, the comptroller shall provide the state and local tax preference review schedule to the Legislative Budget Board.

SUBCHAPTER C. REVIEW OF STATE AND LOCAL TAX PREFERENCES

Sec. 320A.101. PERIODIC REVIEW OF TAX PREFERENCES. The Legislative Budget Board shall periodically review each state tax preference and each type of local tax preference according to the state and local tax preference review schedule provided by the comptroller under Section 320A.053. In reviewing a tax preference, the board shall:

(1) summarize the legislative history of the tax preference;

(2) estimate the amount of lost tax revenue attributable to the tax preference during the preceding six-year period, including the percent reduction in the tax revenue of the related state or local tax, using amounts reported by the comptroller under Section 403.014, if available;

(3) determine the effect of the tax preference on the distribution of the tax burden by income class and industry or business class during the preceding six-year period, using amounts reported and data analyzed by the comptroller under Sections 403.014 and 403.0141, if available; and

(4) evaluate, for a tax preference that reduces by more than one percent the total revenue of the related state or local tax, the fiscal impact of the tax preference during the preceding and following six-year periods, based on a cost-benefit analysis of the general effects of the tax preference on the overall state economy, including the effects on:

(A) job creation by industry sector;

(B) average wage by industry sector;

(C) gross state product by industry sector;

(D) business expenditures by industry sector; and

(E) personal consumption by income class.

Sec. 320A.102. COOPERATION BY OTHER STATE ENTITIES. (a) The Legislative Budget Board may request assistance from the comptroller or any other state agency, department, or office if the board needs assistance to perform the review required by Section 320A.101. The comptroller or other agency, department, or office shall provide the requested assistance.

(b) Notwithstanding Section 111.006, Tax Code, or other law, the comptroller shall provide to the Legislative Budget Board complete electronic access to tax files maintained by the comptroller, as the staff of the board determines necessary to perform a review required by Section 320A.101. An employee of the board that accesses tax files maintained by the comptroller is subject to the same duties and requirements regarding confidentiality as an employee of the comptroller who accesses the files.

SUBCHAPTER D. RECOMMENDATIONS REGARDING REVIEWED TAX PREFERENCES

Sec. 320A.151. PRELIMINARY REPORT. Not later than September 1 of each even-numbered year, the Legislative Budget Board shall provide to the presiding officers of the senate finance committee, or its successor, and the house ways and means committee, or its successor, a preliminary report on the reviews of tax preferences identified under Section 320A.051(a)(3). The report must include drafts of any proposed legislation needed to implement the board's recommendations.

Sec. 320A.152. FINAL REPORT. (a) The senate finance committee, or its successor, and the house ways and means committee, or its successor, shall review and may modify the preliminary report and proposed legislation provided to the committees under Section 320A.151.

(b) Not later than December 1 of each even-numbered year, the senate finance committee, or its successor, and the house ways and means committee, or its successor, shall provide to the governor, the lieutenant governor, and the speaker of the house of representatives a final report on the reviews of tax preferences identified under Section 320A.051(a)(3). The final report must include:

(1) as to each tax preference examined, a recommendation to:

(A) continue the tax preference;

(B) amend a provision relating to the tax preference; or

(C) repeal the tax preference;

(2) a complete explanation of each recommendation;

(3) proposed legislation necessary to implement the findings of the final report; and

(4) a description of any deviations from the preliminary report provided under Section 320A.151 that are made by the final report, and a description of the reasons for each deviation.

Sec. 320A.153. PUBLIC HEARING ON FINAL REPORT. The senate finance committee, or its successor, and the house ways and means committee, or its successor, shall hold a joint public hearing on the final report and proposed legislation provided under Section 320A.152.

SUBCHAPTER E. EXPIRATION OF TAX PREFERENCES

Sec. 320A.201. EXPIRATION; REQUIRED STATEMENT. (a) Each tax preference enacted by the legislature that becomes law on or after September 1, 2016:

(1) expires six years after the date the tax preference takes effect, unless the legislature provides for an earlier or later expiration date; and

(2) must include the following statement: "This tax preference expires six years after its effective date unless the legislature provides for an earlier or later expiration date."

(b) A tax preference to which Subsection (a) applies that does not include the statement required by Subsection (a)(2) expires as provided by Subsection (a)(1).

SECTION 2. The comptroller of public accounts shall submit the initial state and local tax preference review schedule required by Section 320A.053, Government Code, as added by this Act, not later than January 15, 2016.

SECTION 3. The Legislative Budget Board shall submit the initial preliminary report required by Section 320A.151, Government Code, as added by this Act, not later than September 1, 2016.

SECTION 4. The senate finance committee and the house ways and means committee shall submit the initial final report required by Section 320A.152, Government Code, as added by this Act, not later than December 1, 2016.

SECTION 5. This Act takes effect January 1, 2016, but only if the constitutional amendment proposed by the 84th Legislature, Regular Session, 2015, requiring the legislature to provide for a periodic review of state and local tax preferences and providing for the expiration of certain tax preferences six years after their effective dates or at another time prescribed by the legislature is approved by the voters. If that amendment is not approved by the voters, this Act has no effect.