85R7172 CJC/JXC-D

By: King of Parker H.B. No. 1228

A BILL TO BE ENTITLED

AN ACT

relating to the phaseout and repeal of the miscellaneous gross receipts tax on utility companies; decreasing the rates of the tax.

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

ARTICLE 1. CHANGES EFFECTIVE DURING PHASEOUT OF TAX

SECTION 1.01. Effective September 1, 2020, Sections 447.013(d) and (e), Government Code, are amended to read as follows:

(d) The account consists of:

(1) [a sub-account in the account that consists of the proceeds of bonds issued under Subsection (j);

[(2)] revenues allocated to the account under former Section 182.122(b) [182.122], Tax Code, before September 1, 2020;

(2) [(3)] any amount appropriated by the legislature for the account;

(3) [(4)] gifts, grants, and other donations received for the account; and

(4) [(5)] interest earned on the investment of money in the account.

(e) Money in the account may be appropriated only to the State Energy Conservation Office to award grants or to make or guarantee loans under this section. The total amount of grants that may be awarded under this section in any state fiscal biennium from revenues described by Subsection (d)(1) [(d)(2)] may not exceed $20 million. The total amount of loans that may be made or guaranteed under this section in any state fiscal biennium from revenues described by Subsection (d)(1) [(d)(2)] may not exceed $10 million.

SECTION 1.02. (a) Section 182.022(b), Tax Code, is amended to read as follows:

(b) The tax rates are:

(1) .465 [.581] percent of the gross receipts from business done in an incorporated city or town having a population of more than 1,000 but less than 2,500[, according to the last federal census next preceding the filing of the report];

(2) .856 [1.07] percent of the gross receipts from business done in an incorporated city or town having a population of 2,500 or more but less than 10,000[, according to the last federal census next preceding the filing of the report]; and

(3) 1.598 [1.997] percent of the gross receipts from business done in an incorporated city or town having a population of 10,000 or more[, according to the last federal census next preceding the filing of the report].

(b) This section applies only to a gross receipts tax report due on or after January 31, 2018.

SECTION 1.03. (a) Effective October 1, 2018, Section 182.022(b), Tax Code, is amended to read as follows:

(b) The tax rates are:

(1) .349 [.581] percent of the gross receipts from business done in an incorporated city or town having a population of more than 1,000 but less than 2,500[, according to the last federal census next preceding the filing of the report];

(2) .642 [1.07] percent of the gross receipts from business done in an incorporated city or town having a population of 2,500 or more but less than 10,000[, according to the last federal census next preceding the filing of the report]; and

(3) 1.198 [1.997] percent of the gross receipts from business done in an incorporated city or town having a population of 10,000 or more[, according to the last federal census next preceding the filing of the report].

(b) This section applies only to a gross receipts tax report due on or after January 31, 2019.

SECTION 1.04. (a) Effective October 1, 2019, Section 182.022(b), Tax Code, is amended to read as follows:

(b) The tax rates are:

(1) .232 [.581] percent of the gross receipts from business done in an incorporated city or town having a population of more than 1,000 but less than 2,500[, according to the last federal census next preceding the filing of the report];

(2) .428 [1.07] percent of the gross receipts from business done in an incorporated city or town having a population of 2,500 or more but less than 10,000[, according to the last federal census next preceding the filing of the report]; and

(3) .799 [1.997] percent of the gross receipts from business done in an incorporated city or town having a population of 10,000 or more[, according to the last federal census next preceding the filing of the report].

(b) This section applies only to a gross receipts tax report due on or after January 31, 2020.

SECTION 1.05. (a) Effective October 1, 2020, Section 182.022(b), Tax Code, is amended to read as follows:

(b) The tax rates are:

(1) .116 [.581] percent of the gross receipts from business done in an incorporated city or town having a population of more than 1,000 but less than 2,500[, according to the last federal census next preceding the filing of the report];

(2) .214 [1.07] percent of the gross receipts from business done in an incorporated city or town having a population of 2,500 or more but less than 10,000[, according to the last federal census next preceding the filing of the report]; and

(3) .399 [1.997] percent of the gross receipts from business done in an incorporated city or town having a population of 10,000 or more[, according to the last federal census next preceding the filing of the report].

(b) This section applies only to a gross receipts tax report due on or after January 31, 2021.

SECTION 1.06. Section 182.122, Tax Code, as effective until September 1, 2020, is amended by adding Subsection (c) to read as follows:

(c) In each state fiscal biennium at the time the comptroller makes the allocation required under this section, the comptroller shall determine the difference between the amount of revenue that would be allocated to the foundation school fund under Subsection (a)(1) during that state fiscal biennium if the tax imposed under Section 182.022 were imposed at the rates in effect on September 30, 2017, and the amount of revenue actually allocated to the foundation school fund under Subsection (a)(1) during that biennium. The comptroller shall transfer from the general revenue fund an amount equal to that difference and credit that amount to the foundation school fund. The transfer required by this subsection is in addition to the allocation of revenue to the foundation school fund under Subsection (a).

SECTION 1.07. Section 182.122, Tax Code, as effective September 1, 2020, is amended to read as follows:

Sec. 182.122. ALLOCATION OF TAX. (a) Revenues collected under this chapter are allocated:

(1) one-fourth to the foundation school fund; and

(2) three-fourths to the general revenue fund.

(b) In each state fiscal biennium at the time the comptroller makes the allocation required under this section, the comptroller shall determine the difference between the amount of revenue that would be allocated to the foundation school fund under Subsection (a)(1) during that state fiscal biennium if the tax imposed under Section 182.022 were imposed at the rates in effect on September 30, 2017, and the amount of revenue actually allocated to the foundation school fund under Subsection (a)(1) during that biennium. The comptroller shall transfer from the general revenue fund an amount equal to that difference and credit that amount to the foundation school fund. The transfer required by this subsection is in addition to the allocation of revenue to the foundation school fund under Subsection (a).

SECTION 1.08. Subchapter E, Chapter 36, Utilities Code, is amended by adding Section 36.2025 to read as follows:

Sec. 36.2025. ADJUSTMENT FOR CHANGES IN GROSS RECEIPTS TAX LIABILITY. (a) The commission shall provide in a rate case under Subchapter C or D for the prospective adjustment of an electric utility's billing to reflect a decrease in the utility's tax liability to this state if the decrease results from a reduction in a rate of the miscellaneous gross receipts tax imposed under Chapter 182, Tax Code, before October 1, 2021, or from the repeal of that chapter.

(b) The commission shall make an adjustment described by Subsection (a) in the first rate case that begins after a decrease in tax liability occurs. The adjustment remains effective only until a subsequent adjustment under this section.

SECTION 1.09. Subchapter G, Chapter 104, Utilities Code, is amended by adding Section 104.302 to read as follows:

Sec. 104.302. ADJUSTMENT FOR CHANGES IN GROSS RECEIPTS TAX LIABILITY. (a) The regulatory authority shall provide for the adjustment of a gas utility's billing to reflect a decrease in the utility's tax liability to this state if the decrease results from a reduction in a rate of the miscellaneous gross receipts tax imposed under Chapter 182, Tax Code, before October 1, 2021, or from the repeal of that chapter.

(b) Each adjustment described by Subsection (a):

(1) shall be made effective at the same time as the decrease of tax liability or as soon after that decrease occurs as is reasonably practicable; and

(2) remains effective only until a subsequent adjustment under this section.

(c) This section does not apply to a gas utility if the regulatory authority enters an order for the utility under Subchapter C or D that accounts for the reduction or repeal of tax liability described by Subsection (a).

(d) An adjustment under this section is not a rate case under Subchapter C or D.

SECTION 1.10. Subchapter F, Chapter 13, Water Code, is amended by adding Section 13.1885 to read as follows:

Sec. 13.1885. ADJUSTMENT FOR CHANGES IN GROSS RECEIPTS TAX LIABILITY. (a) The regulatory authority shall provide for the adjustment of a utility's billing to reflect a decrease in the utility's tax liability to this state if the decrease results from a reduction in a rate of the miscellaneous gross receipts tax imposed under Chapter 182, Tax Code, before October 1, 2021, or from the repeal of that chapter.

(b) Each adjustment described by Subsection (a):

(1) shall be made effective at the same time as the decrease of tax liability or as soon after that decrease occurs as is reasonably practicable; and

(2) remains effective only until a subsequent adjustment under this section.

(c) This section does not apply to a utility if the regulatory authority determines the utility's rates by an order issued under this subchapter for the utility that accounts for the reduction or repeal of tax liability described by Subsection (a).

(d) An adjustment under this section is an uncontested matter not subject to a contested case hearing. An adjustment under this section is not a rate case.

ARTICLE 2. REPEAL OF TAX ON OCTOBER 1, 2021, AND CHANGES EFFECTIVE

ON REPEAL OF TAX

SECTION 2.01. (a) The following provisions of the Tax Code are repealed:

(1) the heading to Chapter 182;

(2) the headings to Subchapters B and C, Chapter 182;

(3) Sections 182.021, 182.022, 182.023, and 182.027;

(4) Subchapters E, F, and G, Chapter 182; and

(5) Section 191.089.

(b) The repeal by this section of the provisions of Chapter 182, Tax Code, listed in Subsection (a) of this section does not affect the taxes imposed under that chapter before the effective date of this article. The provisions of Chapter 182 in effect immediately before the effective date of this article that relate to the collection and enforcement of the taxes accruing before the effective date of this article and to the allocation of revenue from those taxes are continued in effect for purposes of collecting and enforcing those taxes, including enforcing the requirements to file tax reports and make tax payments on or before October 31, 2021, and allocating revenue from those taxes.

(c) The repeal by this section of the provisions of Chapter 182, Tax Code, listed in Subsection (a) and Section 191.089, Tax Code, does not affect the imposition of a penalty under Chapter 182, Tax Code, for conduct occurring before the effective date of this article. For purposes of this subsection, conduct occurs before the effective date of this article if any element of the conduct subject to the imposition of the penalty occurs before that date. Conduct occurring before the effective date of this article is governed by the law in effect when the conduct occurred, and the former law is continued in effect for that purpose.

SECTION 2.02. Section 91.904, Natural Resources Code, is amended to read as follows:

Sec. 91.904. CONSTRUCTION OF SUBCHAPTER. This subchapter may not be construed to:

(1) limit the authority of a saltwater pipeline facility to use a public right-of-way under any other law;

(2) affect the authority of a municipality to:

(A) regulate the use of a public right-of-way by a saltwater pipeline operator under any other law; or

(B) require payment of any applicable charge under Section 253.003, Utilities [182.025, Tax] Code; or

(3) require a county or municipality to:

(A) grant a right to a saltwater pipeline operator that applies to a public road or right-of-way and that is broader than the county's or municipality's legal interest in the public road or right-of-way; or

(B) grant more than a surface right to a saltwater pipeline operator in a right-of-way acquired by prescription.

SECTION 2.03. Section 37.101(d), Utilities Code, is amended to read as follows:

(d) This section does not:

(1) limit the power of a city, town, or village to incorporate or of a municipality to extend its boundaries by annexation; or

(2) prohibit a municipality from levying a tax or other special charge for the use of the streets as authorized by Section 253.003 [182.025, Tax Code].

SECTION 2.04. Section 41.005, Utilities Code, is amended to read as follows:

Sec. 41.005. LIMITATION ON MUNICIPAL AUTHORITY. Notwithstanding any other provision of this title, a municipality may not directly or indirectly regulate the rates, operations, and services of an electric cooperative, except, with respect to operations, to the extent necessary to protect the public health, safety, or welfare. This section does not prohibit a municipality from making a lawful charge for the use of public rights-of-way within the municipality as provided by Sections [Section 182.025, Tax Code, and Section] 33.008 and 253.003. An electric cooperative shall be an electric utility for purposes of Sections [Section 182.025, Tax Code, and Section] 33.008 and 253.003.

SECTION 2.05. Section 121.2025(a), Utilities Code, is amended to read as follows:

(a) Except as otherwise provided by this section or Section 253.003 [182.025, Tax Code], a municipality may not assess a charge for the placement, construction, maintenance, repair, replacement, operation, use, relocation, or removal of a gas pipeline facility on, along, under, or across a public road, highway, street, alley, stream, canal, or other public way.

SECTION 2.06. Section 121.211(g), Utilities Code, is amended to read as follows:

(g) Each operator of a natural gas distribution system and each natural gas master meter operator shall recover as a surcharge to its existing rates the amounts paid to the commission under this section. Amounts collected under this subsection by an investor-owned natural gas distribution system or a cooperatively owned natural gas distribution system shall not be included in the revenue or gross receipts of the company for the purpose of calculating municipal franchise fees or any tax imposed under [Subchapter B, Chapter 182, Tax Code, or under] Chapter 122 or Section 253.003. Those amounts are not subject to a sales and use tax imposed by Chapter 151, Tax Code, or Subtitle C, Title 3, Tax Code.

SECTION 2.07. Section 181.005(b), Utilities Code, is amended to read as follows:

(b) The right granted by Subsection (a) relating to the use of a municipal street or alley is subject to the payment of charges in accordance with Sections [Section] 121.2025 and 253.003 [of this code and Sections 182.025 and 182.026, Tax Code].

SECTION 2.08. Section 181.047(d), Utilities Code, is amended to read as follows:

(d) This section does not prohibit a municipality from imposing a tax or special charge for the use of a street as authorized by [Subchapter B,] Chapter 253 [182, Tax Code].

SECTION 2.09. (a) Title 5, Utilities Code, is amended by adding Chapter 253 to read as follows:

CHAPTER 253. TAXES AND CHARGES IMPOSED ON OR PROHIBITED FROM BEING

IMPOSED ON CERTAIN UTILITIES LOCATED IN INCORPORATED AREAS

Sec. 253.001. DEFINITIONS. (a) In this chapter:

(1) "Business" means the provision of gas, electricity, or water.

(2) "Distribution service" has the meaning assigned by Section 33.008.

(3) "Electric utility" has the meaning assigned by Section 31.002.

(4) "Public utility" means:

(A) a person who owns or operates a gas or water works or water plant used for local sale and distribution located in an incorporated city or town in this state; or

(B) an electric utility or transmission and distribution utility providing distribution service in an incorporated city or town in this state.

(5) "Transmission and distribution utility" has the meaning assigned by Section 31.002.

(6) "Utility company" means, except as provided by Subsection (b), a person:

(A) who owns or operates a gas or water works or water plant used for local sale and distribution located in an incorporated city or town in this state; or

(B) who owns or operates an electric light or electric power works or light plant used for local sale and distribution located in an incorporated city or town in this state, or who is a retail electric provider, as that term is defined in Section 31.002, including a retail electric provider owned, operated, or controlled by an electric cooperative, that makes local sales in an incorporated city or town in this state.

(b) For purposes of this chapter, "utility company" does not include a person who owns an electric light or electric power or gas plant used for distribution but who does not make retail sales to the ultimate consumer in an incorporated city or town in this state.

(b) Sections 182.024, 182.025, and 182.026, Tax Code, are transferred to Chapter 253, Utilities Code, as added by this section, redesignated as Sections 253.002, 253.003, and 253.004, Utilities Code, respectively, and amended to read as follows:

Sec. 253.002 [182.024]. TAX OR CHARGE BY CERTAIN POLITICAL SUBDIVISIONS. No city or other political subdivision of this state may impose an occupation tax or charge of any sort on a utility company located in an incorporated city or town with a population of more than 1,000 [taxed under this subchapter].

Sec. 253.003 [182.025]. CHARGES BY A CITY. (a) An incorporated city or town may make a reasonable lawful charge for the use of a city street, alley, or public way by a public utility in the course of its business.

(b) The total charges, however designated or measured, may not exceed two percent of the gross receipts of the public utility for the sale of gas or water within the city.

(c) The total charges, however designated or measured, relating to distribution service of an electric utility or transmission and distribution utility within the city may not exceed the amount or amounts prescribed by Section 33.008[, Utilities Code]. The charges paid by an electric utility or transmission and distribution utility under this subsection may be only for distribution service.

(d) If a public utility located in an incorporated city or town with a population of more than 1,000 [taxed under this subchapter] pays a special tax, rental, contribution, or charge under a contract or franchise executed before May 1, 1941, the city shall credit the payment against the amount owed by the public utility on any charge allowable under Subsection (a) [of this section].

[(e) In this section:

[(1) "Distribution service" has the meaning assigned by Section 33.008, Utilities Code.

[(2) "Electric utility" has the meaning assigned by Section 31.002, Utilities Code.

[(3) "Public utility" means:

[(A) a person who owns or operates a gas or water works or water plant used for local sale and distribution located within an incorporated city or town in this state; or

[(B) an electric utility or transmission and distribution utility providing distribution service within an incorporated city or town in this state.

[(4) "Transmission and distribution utility" has the meaning assigned by Section 31.002, Utilities Code.]

Sec. 253.004 [182.026]. APPLICABILITY AND EFFECT OF CHAPTER [SUBCHAPTER NOT APPLICABLE]. (a) This chapter [subchapter] does not apply to a utility company owned and operated by a city, town, county, water improvement district, or conservation district.

(b) This chapter [subchapter] does not:

(1) affect collection of ad valorem taxes; or

(2) impair or alter a provision of a contract, agreement, or franchise made between a city and a public utility company relating to a payment made to the city.

SECTION 2.10. Section 13.247(c), Water Code, is amended to read as follows:

(c) This section may not be construed as limiting the power of municipalities to incorporate or extend their boundaries by annexation, or as prohibiting any municipality from levying taxes and other special charges for the use of the streets as are authorized by Section 253.003, Utilities [182.025, Tax] Code.

ARTICLE 3. EFFECTIVE DATE

SECTION 3.01. (a) Except as provided by Subsection (b) of this section, this Act takes effect October 1, 2017.

(b) Article 2 of this Act takes effect October 1, 2021.