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A BILL TO BE ENTITLED
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AN ACT
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relating to the exemption of inventory from ad valorem taxation. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Section 93.001(2), Business & Commerce Code, is |
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amended to read as follows: |
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(2) "Heavy equipment" means self-propelled, |
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self-powered, or pull-type equipment, including farm equipment or a |
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diesel engine, that weighs at least 1,500 pounds and is intended to |
|
be used for agricultural, construction, industrial, maritime, |
|
mining, or forestry uses. The term does not include a motor |
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vehicle that is required by: |
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(A) Chapter 501, Transportation Code, to be |
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titled; or |
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(B) Chapter 502, Transportation Code, to be |
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registered [has the meaning assigned by Section 23.1241, Tax Code]. |
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SECTION 2. Section 6.24(b), Tax Code, is amended to read as |
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follows: |
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(b) The commissioners court with the approval of the county |
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assessor-collector may contract as provided by the Interlocal |
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Cooperation Act with the governing body of another taxing unit in |
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the county or with the board of directors of the appraisal district |
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for the other taxing unit or the district to perform duties relating |
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to the assessment or collection of taxes for the county. If a |
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county contracts to have its taxes assessed and collected by |
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another taxing unit or by the appraisal district, [except as |
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provided by Subsection (c),] the contract shall require the other |
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taxing unit or the district to assess and collect all taxes the |
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county is required to assess and collect. |
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SECTION 3. Sections 11.251(b), (c), (d), and (h), Tax Code, |
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are amended to read as follows: |
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(b) A person is entitled to an exemption from taxation by a |
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taxing unit of the appraised value of that portion of the person's |
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[inventory or] property consisting of freeport goods as determined |
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under this section for the taxing unit. |
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(c) The exemption provided by Subsection (b) is subtracted |
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from the market value of the [inventory or] property [determined |
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under Section 23.12] to determine the taxable value of the |
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[inventory or] property [for the taxing unit]. |
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(d) Except as provided by Subsections (f) and (g), the chief |
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appraiser shall determine the appraised value of freeport goods |
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under this subsection. The chief appraiser shall determine the |
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percentage of the market value of [inventory or] property owned by |
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the property owner in the preceding calendar year that was |
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contributed by freeport goods. The chief appraiser shall apply |
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that percentage to the market value of the property owner's |
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[inventory or] property for the current year to determine the |
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appraised value of freeport goods for the current year. |
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(h) The chief appraiser by written notice delivered to a |
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property owner who claims an exemption under this section may |
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require the property owner or a person designated in writing by the |
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importer of record to provide copies of [inventory or] property |
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records in order to determine the amount and value of freeport |
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goods. If the property owner or designated person fails to deliver |
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the information requested in the notice before the 31st day after |
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the date the notice is delivered to the property owner or before the |
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date the appraisal review board approves the appraisal records |
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under Section 41.12, whichever is later, the property owner |
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forfeits the right to claim or receive the exemption for that year. |
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If the property owner or designated person delivers the information |
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requested in the notice before the date the appraisal review board |
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approves the appraisal records but not before the 31st day after the |
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date the notice is delivered to the property owner and the exemption |
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is allowed, the property owner is liable to each taxing unit for a |
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penalty in an amount equal to 10 percent of the difference between |
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the amount of tax imposed by the taxing unit on the [inventory or] |
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property and the amount that would otherwise have been imposed. The |
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chief appraiser shall make an entry on the appraisal records for the |
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[inventory or] property indicating the property owner's liability |
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for the penalty and shall deliver a written notice of imposition of |
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the penalty, explaining the reason for its imposition, to the |
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property owner. The assessor for a taxing unit that taxes the |
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[inventory or] property shall add the amount of the penalty to the |
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property owner's tax bill, and the tax collector for the taxing unit |
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shall collect the penalty at the time and in the manner the |
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collector collects the tax. The amount of the penalty constitutes a |
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lien against the [inventory or] property against which the penalty |
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is imposed, as if it were a tax, and accrues penalty and interest in |
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the same manner as a delinquent tax. |
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SECTION 4. Section 11.253(a)(2), Tax Code, is amended to |
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read as follows: |
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(2) "Goods-in-transit" means tangible personal |
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property that: |
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(A) is acquired in or imported into this state to |
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be forwarded to another location in this state or outside this |
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state; |
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(B) is stored under a contract of bailment by a |
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public warehouse operator at one or more public warehouse |
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facilities in this state that are not in any way owned or controlled |
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by the owner of the personal property for the account of the person |
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who acquired or imported the property; |
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(C) is transported to another location in this |
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state or outside this state not later than 175 days after the date |
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the person acquired the property in or imported the property into |
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this state; and |
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(D) does not include oil, natural gas, petroleum |
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products, or aircraft[, dealer's motor vehicle inventory, dealer's |
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vessel and outboard motor inventory, dealer's heavy equipment |
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inventory, or retail manufactured housing inventory]. |
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SECTION 5. Section 11.253(c), Tax Code, is amended to read |
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as follows: |
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(c) The exemption provided by Subsection (b) is subtracted |
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from the market value of the property [determined under Section |
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23.01 or 23.12, as applicable,] to determine the taxable value of |
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the property. |
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SECTION 6. Subchapter B, Chapter 11, Tax Code, is amended by |
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adding Section 11.36 to read as follows: |
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Sec. 11.36. INVENTORY. (a) In this section, "inventory" |
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means: |
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(1) a finished good held for sale or resale; |
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(2) a raw or finished material held to be incorporated |
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into or attached to tangible personal property to create a finished |
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good; or |
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(3) residential real property that has never been |
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occupied as a residence and is held for sale in the ordinary course |
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of a trade or business, provided that the residential real property |
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remains unoccupied, is not leased or rented, and produces no |
|
income. |
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(b) A person is entitled to an exemption from taxation by a |
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taxing unit of inventory owned by the person. |
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SECTION 7. Sections 11.4391(b), (c), and (d), Tax Code, are |
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amended to read as follows: |
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(b) If the application is approved, the property owner is |
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liable to each taxing unit for a penalty in an amount equal to 10 |
|
percent of the difference between the amount of tax imposed by the |
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taxing unit on the [inventory or] property, a portion of which |
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consists of freeport goods, and the amount that would otherwise |
|
have been imposed. |
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(c) The chief appraiser shall make an entry on the appraisal |
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records for the [inventory or] property indicating the property |
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owner's liability for the penalty and shall deliver a written |
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notice of imposition of the penalty, explaining the reason for its |
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imposition, to the property owner. |
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(d) The tax assessor for a taxing unit that taxes the |
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[inventory or] property shall add the amount of the penalty to the |
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property owner's tax bill, and the tax collector for the taxing unit |
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shall collect the penalty at the time and in the manner the |
|
collector collects the tax. The amount of the penalty constitutes a |
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lien against the [inventory or] property against which the penalty |
|
is imposed, as if it were a tax, and accrues penalty and interest in |
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the same manner as a delinquent tax. |
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SECTION 8. Sections 22.01(a) and (g), Tax Code, are amended |
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to read as follows: |
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(a) Except as provided by Chapter 24, a person shall render |
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for taxation all tangible personal property used for the production |
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of income that the person owns or that the person manages and |
|
controls as a fiduciary on January 1. A rendition statement shall |
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contain: |
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(1) the name and address of the property owner; |
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(2) a description of the property by type or category; |
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(3) [if the property is inventory, a description of |
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each type of inventory and a general estimate of the quantity of |
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each type of inventory; |
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[(4)] the physical location or taxable situs of the |
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property; and |
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(4) [(5)] the property owner's good faith estimate of |
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the market value of the property or, at the option of the property |
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owner, the historical cost when new and the year of acquisition of |
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the property. |
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(g) A person's good faith estimate of the market value of |
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the property under Subsection (a)(4) [(a)(5)] is solely for the |
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purpose of compliance with the requirement to render tangible |
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personal property and is inadmissible in any subsequent protest, |
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hearing, appeal, suit, or other proceeding under this title |
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involving the property, except for: |
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(1) a proceeding to determine whether the person |
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complied with this section; |
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(2) a proceeding under Section 22.29(b); or |
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(3) a protest under Section 41.41. |
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SECTION 9. Section 22.04(d), Tax Code, is amended to read as |
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follows: |
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(d) This section does not apply to a motor vehicle that on |
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January 1 is located at a place of business of a person who holds a |
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wholesale motor vehicle auction general distinguishing number |
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issued by the Texas Department of Motor Vehicles under Chapter 503, |
|
Transportation Code, for that place of business, and that: |
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(1) has not acquired taxable situs under Section |
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21.02(a)(1) in a taxing unit that participates in the appraisal |
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district because the vehicle is described by Section 21.02(d); |
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(2) is offered for sale by a dealer who holds a |
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dealer's general distinguishing number issued by the Texas |
|
Department of Motor Vehicles under Chapter 503, Transportation |
|
Code[, and whose inventory of motor vehicles is subject to taxation |
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in the manner provided by Sections 23.121 and 23.122]; or |
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(3) is collateral possessed by a lienholder and |
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offered for sale in foreclosure of a security interest. |
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SECTION 10. Section 22.07(c), Tax Code, is amended to read |
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as follows: |
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(c) The chief appraiser may request, either in writing or by |
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electronic means, that the property owner provide a statement |
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containing supporting information indicating how the value |
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rendered under Section 22.01(a)(4) [22.01(a)(5)] was |
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determined. The statement must: |
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(1) summarize information sufficient to identify the |
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property, including: |
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(A) the physical and economic characteristics |
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relevant to the opinion of value, if appropriate; and |
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(B) the source of the information used; |
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(2) state the effective date of the opinion of value; |
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and |
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(3) explain the basis of the value rendered, which may |
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be the depreciation schedules used for federal income tax purposes |
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if [. If] the property owner is a business with 50 employees or |
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less[, the property owner may base the estimate of value on the |
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depreciation schedules used for federal income tax purposes]. |
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SECTION 11. Sections 23.20(a), (b), and (c), Tax Code, are |
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amended to read as follows: |
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(a) A property owner [An owner of inventory or real |
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property] may in writing waive the right to special appraisal |
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provided by [Section 23.12 or] Subchapter C, D, E, F, or G as to one |
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or more taxing units designated in the waiver. In a tax year in |
|
which a waiver is in effect, the property is appraised for each |
|
taxing unit to which the waiver applies at the value determined |
|
under Subchapter A of this chapter or the value determined under |
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[Section 23.12 or] Subchapter C, D, E, F, or G, whichever is the |
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greater value. |
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(b) [A waiver of the right to special appraisal provided by |
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Section 23.12 may be submitted at any time.] A waiver of the right |
|
to special appraisal provided by Subchapter C, D, E, F, or G may be |
|
submitted with an application for appraisal under that subchapter |
|
or at any other time. A property owner who has waived special |
|
appraisal under this section as to one or more taxing units may make |
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additional waivers under this section as to other taxing units in |
|
which the property is located. |
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(c) A waiver under this section is effective for 25 |
|
consecutive tax years beginning on the first tax year in which the |
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waiver is effective without regard to whether the property is |
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subject to appraisal under [Section 23.12 or] Subchapter C, D, E, F, |
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or G. To be effective in the year in which the waiver is executed, it |
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must be filed before May 1 of that year with the chief appraiser of |
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the appraisal district in which the property is located, unless for |
|
good cause shown the chief appraiser extends the filing deadline |
|
for not more than 60 days. An application filed after the year's |
|
deadline takes effect in the next tax year. |
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SECTION 12. The heading to Section 31.081, Tax Code, is |
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amended to read as follows: |
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Sec. 31.081. PROPERTY TAX WITHHOLDING ON PURCHASE OF |
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BUSINESS [OR INVENTORY]. |
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SECTION 13. Sections 31.081(a), (f), and (g), Tax Code, are |
|
amended to read as follows: |
|
(a) This section applies only to a person who purchases a |
|
business or [,] an interest in a business[, or the inventory of a |
|
business] from a person who is liable under this title for the |
|
payment of taxes imposed on personal property used in the operation |
|
of that business. |
|
(f) This section does not release a person who sells a |
|
business [or the inventory of a business] from any personal |
|
liability imposed on the person for the payment of taxes imposed on |
|
the personal property of the business or for penalties or interest |
|
on those taxes. |
|
(g) For purposes of this section, [: |
|
[(1)] a person is considered to have purchased a |
|
business if the person purchases the name of the business or the |
|
goodwill associated with the business[; and |
|
[(2) a person is considered to have purchased the |
|
inventory of a business if the person purchases inventory of a |
|
business, the value of which is at least 50 percent of the value of |
|
the total inventory of the business on the date of the purchase]. |
|
SECTION 14. Section 32.01(b), Tax Code, is amended to read |
|
as follows: |
|
(b) A tax lien on [inventory,] furniture, equipment, or |
|
other personal property is a lien in solido and attaches to all |
|
[inventory,] furniture, equipment, and other personal property |
|
that the property owner owns on January 1 of the year the lien |
|
attaches or that the property owner subsequently acquires. |
|
SECTION 15. Section 41.44(a), Tax Code, is amended to read |
|
as follows: |
|
(a) Except as provided by Subsections (b), (c), (c-1), and |
|
(c-2), to be entitled to a hearing and determination of a protest, |
|
the property owner initiating the protest must file a written |
|
notice of the protest with the appraisal review board having |
|
authority to hear the matter protested: |
|
(1) not later than May 15 or the 30th day after the |
|
date that notice to the property owner was delivered to the property |
|
owner as provided by Section 25.19, whichever is later; |
|
(2) in the case of a protest of a change in the |
|
appraisal records ordered as provided by Subchapter A of this |
|
chapter or by Chapter 25, not later than the 30th day after the date |
|
notice of the change is delivered to the property owner; |
|
(3) in the case of a determination that a change in the |
|
use of land appraised under Subchapter C, D, E, or H, Chapter 23, |
|
has occurred, not later than the 30th day after the date the notice |
|
of the determination is delivered to the property owner; or |
|
(4) [in the case of a determination of eligibility for |
|
a refund under Section 23.1243, not later than the 30th day after |
|
the date the notice of the determination is delivered to the |
|
property owner; or |
|
[(5)] in the case of a protest of the modification or |
|
denial of an application for an exemption under Section 11.35, or |
|
the determination of an appropriate damage assessment rating for an |
|
item of qualified property under that section, not later than the |
|
30th day after the date the property owner receives the notice |
|
required under Section 11.45(e). |
|
SECTION 16. Sections 42.01(a) and (c), Tax Code, are |
|
amended to read as follows: |
|
(a) A property owner is entitled to appeal: |
|
(1) an order of the appraisal review board |
|
determining: |
|
(A) a protest by the property owner as provided |
|
by Subchapter C of Chapter 41; |
|
(B) a motion filed under Section 25.25; |
|
(C) that the property owner has forfeited the |
|
right to a final determination of a motion filed under Section 25.25 |
|
or of a protest under Section 41.411 for failing to comply with the |
|
prepayment requirements of Section 25.26 or 41.4115, as applicable; |
|
or |
|
(D) [eligibility for a refund requested under |
|
Section 23.1243; or |
|
[(E)] that the appraisal review board lacks |
|
jurisdiction to finally determine a protest by the property owner |
|
under Subchapter C, Chapter 41, or a motion filed by the property |
|
owner under Section 25.25 because the property owner failed to |
|
comply with a requirement of Subchapter C, Chapter 41, or Section |
|
25.25, as applicable; or |
|
(2) an order of the comptroller issued as provided by |
|
Subchapter B, Chapter 24, apportioning among the counties the |
|
appraised value of railroad rolling stock owned by the property |
|
owner. |
|
(c) A property owner who establishes that the appraisal |
|
review board had jurisdiction to issue a final determination of the |
|
protest by the property owner under Subchapter C, Chapter 41, or of |
|
the motion filed by the property owner under Section 25.25 in an |
|
appeal under Subsection (a)(1)(D) [(a)(1)(E)] of this section is |
|
entitled to a final determination by the court of the protest under |
|
Subchapter C, Chapter 41, or of the motion filed under Section |
|
25.25. A final determination of a protest under Subchapter C, |
|
Chapter 41, by the court under this subsection may be on any ground |
|
of protest authorized by this title applicable to the property that |
|
is the subject of the protest, regardless of whether the property |
|
owner included the ground in the property owner's notice of |
|
protest. |
|
SECTION 17. Sections 312.204(a) and (g), Tax Code, are |
|
amended to read as follows: |
|
(a) The governing body of a municipality eligible to enter |
|
into tax abatement agreements under Section 312.002 may agree in |
|
writing with the owner of taxable real property that is located in a |
|
reinvestment zone, but that is not in an improvement project |
|
financed by tax increment bonds, to exempt from taxation a portion |
|
of the value of the real property or of tangible personal property |
|
located on the real property, or both, for a period not to exceed 10 |
|
years, on the condition that the owner of the property make specific |
|
improvements or repairs to the property. The governing body of an |
|
eligible municipality may agree in writing with the owner of a |
|
leasehold interest in tax-exempt real property that is located in a |
|
reinvestment zone, but that is not in an improvement project |
|
financed by tax increment bonds, to exempt a portion of the value of |
|
property subject to ad valorem taxation, including the leasehold |
|
interest, improvements, or tangible personal property located on |
|
the real property, for a period not to exceed 10 years, on the |
|
condition that the owner of the leasehold interest make specific |
|
improvements or repairs to the real property. A tax abatement |
|
agreement under this section is subject to the rights of holders of |
|
outstanding bonds of the municipality. An agreement exempting |
|
taxable real property or leasehold interests or improvements on |
|
tax-exempt real property may provide for the exemption of such |
|
taxable interests in each year covered by the agreement only to the |
|
extent its value for that year exceeds its value for the year in |
|
which the agreement is executed. An agreement exempting tangible |
|
personal property located on taxable or tax-exempt real property |
|
may provide for the exemption of tangible personal property located |
|
on the real property in each year covered by the agreement other |
|
than tangible personal property that was located on the real |
|
property at any time before the period covered by the agreement with |
|
the municipality, including [inventory and] supplies. In a |
|
municipality that has a comprehensive zoning ordinance, an |
|
improvement, repair, development, or redevelopment taking place |
|
under an agreement under this section must conform to the |
|
comprehensive zoning ordinance. |
|
(g) Notwithstanding the other provisions of this chapter, |
|
the governing body of a municipality eligible to enter into tax |
|
abatement agreements under Section 312.002 may agree in writing |
|
with the owner of real property that is located in a reinvestment |
|
zone to exempt from taxation for a period not to exceed five years a |
|
portion of the value of the real property or of tangible personal |
|
property located on the real property, or both, that is used to |
|
provide housing for military personnel employed at a military |
|
facility located in or near the municipality. An agreement may |
|
provide for the exemption of the real property in each year covered |
|
by the agreement only to the extent its value for that year exceeds |
|
its value for the year in which the agreement is executed. An |
|
agreement may provide for the exemption of tangible personal |
|
property located on the real property in each year covered by the |
|
agreement other than tangible personal property that was located on |
|
the real property at any time before the period covered by the |
|
agreement with the municipality and other than [inventory or] |
|
supplies. The governing body of the municipality may adopt |
|
guidelines and criteria for tax abatement agreements entered into |
|
under this subsection that are different from the guidelines and |
|
criteria that apply to tax abatement agreements entered into under |
|
another provision of this section. Tax abatement agreements |
|
entered into under this subsection are not required to contain |
|
identical terms for the portion of the value of the property that is |
|
to be exempt or for the duration of the exemption as tax abatement |
|
agreements entered into with the owners of property in the |
|
reinvestment zone under another provision of this section. |
|
SECTION 18. Section 503.038(a), Transportation Code, is |
|
amended to read as follows: |
|
(a) The department may cancel a dealer's general |
|
distinguishing number if the dealer: |
|
(1) falsifies or forges a title document, including an |
|
affidavit making application for a certified copy of a title; |
|
(2) files a false or forged tax document, including a |
|
sales tax affidavit; |
|
(3) fails to take assignment of any basic evidence of |
|
ownership, including a certificate of title or manufacturer's |
|
certificate, for a vehicle the dealer acquires; |
|
(4) fails to assign any basic evidence of ownership, |
|
including a certificate of title or manufacturer's certificate, for |
|
a vehicle the dealer sells; |
|
(5) uses or permits the use of a metal dealer's license |
|
plate or a dealer's temporary tag on a vehicle that the dealer does |
|
not own or control or that is not in stock and offered for sale; |
|
(6) makes a material misrepresentation in an |
|
application or other information filed with the department; |
|
(7) fails to maintain the qualifications for a general |
|
distinguishing number; |
|
(8) fails to provide to the department within 30 days |
|
after the date of demand by the department satisfactory and |
|
reasonable evidence that the person is regularly and actively |
|
engaged in business as a wholesale or retail dealer; |
|
(9) has been licensed for at least 12 months and has |
|
not assigned at least five vehicles during the previous 12-month |
|
period; |
|
(10) [has failed to demonstrate compliance with |
|
Sections 23.12, 23.121, and 23.122, Tax Code; |
|
[(11)] uses or allows the use of the dealer's general |
|
distinguishing number or the location for which the general |
|
distinguishing number is issued to avoid the requirements of this |
|
chapter; |
|
(11) [(12)] misuses or allows the misuse of a |
|
temporary tag authorized under this chapter; |
|
(12) [(13)] refuses to show on a buyer's temporary tag |
|
the date of sale or other reasonable information required by the |
|
department; or |
|
(13) [(14)] otherwise violates this chapter or a rule |
|
adopted under this chapter. |
|
SECTION 19. The following provisions of the Tax Code are |
|
repealed: |
|
(1) Section 6.24(c); |
|
(2) Section 11.253(a)(1); |
|
(3) Section 23.12; |
|
(4) Section 23.121; |
|
(5) Section 23.1211; |
|
(6) Section 23.122; |
|
(7) Section 23.123; |
|
(8) Section 23.124; |
|
(9) Section 23.1241; |
|
(10) Section 23.1242; |
|
(11) Section 23.1243; |
|
(12) Section 23.125; |
|
(13) Section 23.126; |
|
(14) Section 23.127; |
|
(15) Section 23.128; |
|
(16) Section 23.129; and |
|
(17) Section 41.47(c-1). |
|
SECTION 20. (a) This Act applies only to a tax year that |
|
begins on or after the effective date of this Act. |
|
(b) Sections 23.121, 23.122, 23.123, 23.124, 23.125, |
|
23.126, 23.127, and 23.128, Tax Code, as repealed by this Act, apply |
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only to an offense committed before the effective date of this Act. |
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An offense committed before the effective date of this Act is |
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governed by the law in effect on the date the offense was committed, |
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and the former law is continued in effect for that purpose. For |
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purposes of this subsection, an offense was committed before the |
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effective date of this Act if any element of the offense occurred |
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before that date. |
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(c) Notwithstanding the changes in law made by this Act to |
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the provisions of the Business & Commerce Code, Tax Code, and |
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Transportation Code amended by this Act and the repeal by this Act |
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of provisions of the Tax Code, each of those provisions, as it |
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existed immediately before January 1, 2024, is continued in effect |
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for the purpose of the levy and collection of an ad valorem tax on |
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inventory imposed before January 1, 2024. |
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SECTION 21. This Act takes effect January 1, 2024, but only |
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if the constitutional amendment proposed by the 88th Legislature, |
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Regular Session, 2023, authorizing the legislature to exempt from |
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ad valorem taxation a person's inventory is approved by the voters. |
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If that amendment is not approved by the voters, this Act has no |
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effect. |