89R12195 BEF/TJB/MEW-F

By: Kerwin H.B. No. 4648

A BILL TO BE ENTITLED

AN ACT

relating to the repeal of ad valorem taxes and certain state and local taxes, the enactment of a uniform state sales tax, and related school and local government finance reform; increasing the rate of a tax.

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

ARTICLE 1. AD VALOREM TAXES PROHIBITED

SECTION 1.01. PROHIBITION ON IMPOSITION OF AD VALOREM TAXES GENERALLY. Except as otherwise provided by Section 1.02(b) of this article, this state or a political subdivision of this state may not impose an ad valorem tax on or after January 1, 2026.

SECTION 1.02. PROHIBITION ON IMPOSITION OF SCHOOL DISTRICT AD VALOREM TAXES. (a) A school district may not impose an ad valorem tax for maintenance or operations purposes on or after January 1, 2026.

(b) A school district may not impose an ad valorem tax for debt service purposes on or after January 1, 2033. Each school district shall provide to the Texas Education Agency:

(1) a current bond schedule;

(2) a balance sheet with proper notes of the district's finances; and

(3) a list of the sources and uses of funding provided to the district.

(c) To restore an efficient education system for the benefit of public school students, the attorney general shall file a suit for involuntary bankruptcy against a school district that does not comply with Subsection (b) of this section.

(d) A reference in the Education Code, the Tax Code, or any other law to a school district's authority to impose an ad valorem tax may not be construed in a manner inconsistent with this article.

SECTION 1.03. EFFECT OF OTHER LAW. To the extent of a conflict, this article controls over a conflicting provision in a general or special law.

ARTICLE 2. UNIFORM STATE SALES TAX

SECTION 2.01. The heading to Chapter 151, Tax Code, is amended to read as follows:

CHAPTER 151. UNIFORM STATE SALES TAX [LIMITED SALES, EXCISE, AND

USE TAX]

SECTION 2.02. Section 151.001, Tax Code, is amended to read as follows:

Sec. 151.001. SHORT TITLE. This chapter may be cited as the Uniform State Sales Tax Act [Limited Sales, Excise, and Use Tax Act].

SECTION 2.03. Section 151.0101, Tax Code, is amended to read as follows:

Sec. 151.0101. "TAXABLE SERVICES". [(a)] "Taxable services" means all services [:

[(1) amusement services;

[(2) cable television services;

[(3) personal services;

[(4) motor vehicle parking and storage services;

[(5) the repair, remodeling, maintenance, and restoration of tangible personal property, except:

[(A) aircraft;

[(B) a ship, boat, or other vessel, other than:

[(i) a taxable boat or motor as defined by Section 160.001;

[(ii) a sports fishing boat; or

[(iii) any other vessel used for pleasure;

[(C) the repair, maintenance, and restoration of a motor vehicle; and

[(D) the repair, maintenance, creation, and restoration of a computer program, including its development and modification, not sold by the person performing the repair, maintenance, creation, or restoration service;

[(6) telecommunications services;

[(7) credit reporting services;

[(8) debt collection services;

[(9) insurance services;

[(10) information services;

[(11) real property services;

[(12) data processing services;

[(13) real property repair and remodeling;

[(14) security services;

[(15) telephone answering services;

[(16) Internet access service; and

[(17) a sale by a transmission and distribution utility, as defined in Section 31.002, Utilities Code, of transmission or delivery of service directly to an electricity end-use customer whose consumption of electricity is subject to taxation under this chapter.

[(b) The comptroller shall have exclusive jurisdiction to interpret Subsection (a) of this section].

SECTION 2.04. Section 151.051(b), Tax Code, is amended to read as follows:

(b) The sales tax rate is 15 [6-1/4] percent of the sales price of the taxable item sold.

SECTION 2.05. Section 151.308(a), Tax Code, is amended to read as follows:

(a) The following are exempted from the taxes imposed by this chapter:

(1) oil as taxed by Chapter 202;

(2) motor fuels and special fuels as defined, taxed, or exempted by Chapter 162; and

(3) [cement as taxed by Chapter 181;

[(4) motor vehicles, trailers, and semitrailers as defined, taxed, or exempted by Chapter 152, other than a mobile office or an oilfield portable unit, as those terms are defined by Section 152.001;

[(5) mixed beverages, ice, or nonalcoholic beverages and the preparation or service of these items if the receipts are taxable by Subchapter B, Chapter 183, or the items are taxable by Subchapter B-1, Chapter 183;

[(6) alcoholic beverages when sold to the holder of a private club registration permit or to the agent or employee of the holder of a private club registration permit if the holder or agent or employee is acting as the agent of the members of the club and if the beverages are to be served on the premises of the club;

[(7) oil well service as taxed by Subchapter E, Chapter 191; and

[(8)] insurance premiums subject to gross premiums taxes.

SECTION 2.06. LOCAL SALES AND USE TAXES PROHIBITED. Notwithstanding any other law, a political subdivision of this state may not impose or collect a sales or use tax on or after the effective date of this Act.

SECTION 2.07. EFFECT OF OTHER LAW. To the extent of a conflict, this article controls over a conflicting provision in a general or special law.

ARTICLE 3. SCHOOL FINANCE

SECTION 3.01. FUNDING. (a) Beginning with the 2026-2027 school year, the Foundation School Program shall be funded using revenue from the uniform state sales tax under Chapter 151, Tax Code.

(b) Each school district shall establish a private citizens board composed of property owners in that school district.

(c) The comptroller of public accounts and the private citizens board for a school district shall administer and distribute funding for that district.

SECTION 3.02. REPORT BY COMMISSIONER OF EDUCATION. The commissioner of education shall annually prepare and provide to the legislature a report for each school district regarding funding for that district, which must be approved by the comptroller of public accounts and the private citizens board established for that school district.

SECTION 3.03. EFFECT OF OTHER LAW. To the extent of a conflict, this article controls over a conflicting provision in a general or special law.

ARTICLE 4. LOCAL GOVERNMENT FINANCE

SECTION 4.01. APPROPRIATIONS BY LEGISLATURE. The legislature shall appropriate money to political subdivisions of this state that previously imposed an ad valorem tax or a sales and use tax in amounts determined by the legislature.

SECTION 4.02. PUBLIC PURPOSE. The legislature finds that the appropriation of state money to political subdivisions of this state to replace local ad valorem taxes and local sales and use tax revenue serves a public purpose of this state.

ARTICLE 5. REPEALERS

SECTION 5.01. EDUCATION CODE PROVISIONS REPEALED. The following provisions of the Education Code are repealed:

(1) Subchapters A, B, C, D, and E, Chapter 45;

(2) Sections 48.255, 48.2551, 48.2552, 48.2553, 48.256, 48.257, and 48.275; and

(3) Chapter 49.

SECTION 5.02. GOVERNMENT CODE PROVISION REPEALED. Subchapter T, Chapter 403, Government Code, as added by Chapter 377 (H.B. 5), Acts of the 88th Legislature, Regular Session, 2023, is repealed.

SECTION 5.03. TAX CODE PROVISIONS REPEALED. The following provisions of the Tax Code are repealed:

(1) Title 1;

(2) Subtitle D, Title 2;

(3) Sections 151.002 through 151.00394;

(4) Sections 151.0045 through 151.0048;

(5) Section 151.0075;

(6) Sections 151.0102 through 151.0104;

(7) Section 151.0595;

(8) Sections 151.304 through 151.3051;

(9) Sections 151.3101 through 151.3171;

(10) Sections 151.3182 through 151.3595;

(11) Sections 151.429 through 151.432;

(12) Sections 151.801(c-2), (c-3), (e)(3), (e)(4), (e)(5), and (f);

(13) Chapters 152, 154, 155, 158, 160, 163, 181, 183, and 191; and

(14) Subtitles B, C, and D, Title 3.

ARTICLE 6. TRANSITION AND EFFECTIVE DATE

SECTION 6.01. PREEXISTING TAX LIABILITY. The changes in law made by this Act do not affect tax liability accruing before the effective date of this Act. That liability continues in effect as if this Act had not been enacted, and the former law is continued in effect for the collection of taxes due and for civil and criminal enforcement of the liability for those taxes.

SECTION 6.02. EFFECTIVE DATE. This Act takes effect January 1, 2026.