Bill Text: TX SB1143 | 2019-2020 | 86th Legislature | Introduced
Bill Title: Relating to the appraisal for ad valorem tax purposes of tangible personal property held for sale at retail and a franchise tax credit based on the ad valorem taxes paid on such property.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Introduced - Dead) 2019-04-15 - Left pending in committee [SB1143 Detail]
Download: Texas-2019-SB1143-Introduced.html
86R490 CJC-D | ||
By: Hughes | S.B. No. 1143 |
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relating to the appraisal for ad valorem tax purposes of tangible | ||
personal property held for sale at retail and a franchise tax credit | ||
based on the ad valorem taxes paid on such property. | ||
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: | ||
SECTION 1. Sections 23.12(a) and (f), Tax Code, are amended | ||
to read as follows: | ||
(a) Except as provided by Sections 23.121, [ |
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23.124, 23.1241, 23.1244, and 23.127, the market value of an | ||
inventory is the price for which it would sell as a unit to a | ||
purchaser who would continue the business. An inventory shall | ||
include residential real property which has never been occupied as | ||
a residence and is held for sale in the ordinary course of a trade or | ||
business, provided that the residential real property remains | ||
unoccupied, is not leased or rented, and produces no income. | ||
(f) The owner of an inventory other than a dealer's motor | ||
vehicle inventory as that term is defined by Section 23.121, [ |
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as that term is defined by Section 23.124, a dealer's heavy | ||
equipment inventory as that term is defined by Section 23.1241, a | ||
retail inventory as that term is defined by Section 23.1244, or a | ||
retail manufactured housing inventory as that term is defined by | ||
Section 23.127 may elect to have the inventory appraised at its | ||
market value as of September 1 of the year preceding the tax year to | ||
which the appraisal applies by filing an application with the chief | ||
appraiser requesting that the inventory be appraised as of | ||
September 1. The application must clearly describe the inventory | ||
to which it applies and be signed by the owner of the inventory. The | ||
application applies to the appraisal of the inventory in each tax | ||
year that begins after the next August 1 following the date the | ||
application is filed with the chief appraiser unless the owner of | ||
the inventory by written notice filed with the chief appraiser | ||
revokes the application or the ownership of the inventory changes. | ||
A notice revoking the application is effective for each tax year | ||
that begins after the next September following the date the notice | ||
of revocation is filed with the chief appraiser. | ||
SECTION 2. Subchapter B, Chapter 23, Tax Code, is amended by | ||
adding Section 23.1244 to read as follows: | ||
Sec. 23.1244. RETAILER'S RETAIL INVENTORY; VALUE. (a) In | ||
this section: | ||
(1) "Chief appraiser" means the chief appraiser for | ||
the appraisal district in which a retailer's retail inventory is | ||
located. | ||
(2) "Declaration" means a retailer's retail inventory | ||
declaration form adopted by the comptroller under this section. | ||
(3) "Retail inventory" means all tangible personal | ||
property that a retailer holds for sale in this state during a | ||
12-month period and for which the retailer is not otherwise | ||
entitled to an exemption from taxation. For purposes of this | ||
section, the term does not include: | ||
(A) real property; or | ||
(B) inventory that qualifies for appraisal under | ||
Section 23.121, 23.124, 23.1241, or 23.127. | ||
(4) "Retailer" means a person who is engaged in the | ||
business in this state of selling retail inventory. For purposes of | ||
this section, the term does not include a bank, savings bank, | ||
savings and loan association, credit union, or other finance | ||
company. | ||
(5) "Sales price" means the total amount of money paid | ||
or to be paid to a retailer for the purchase of an item of retail | ||
inventory. | ||
(6) "Total annual sales" means the total of the sales | ||
price from every sale from a retailer's retail inventory for a | ||
12-month period. | ||
(b) For the purpose of the computation of property tax, the | ||
chief appraiser shall determine the market value of a retailer's | ||
retail inventory on January 1 to be the average of the following | ||
amounts: | ||
(1) the market value of the retail inventory on that | ||
date as determined under Section 23.12; and | ||
(2) the retailer's total annual sales, less sales at | ||
wholesale and sales to other retailers, for the 12-month period | ||
corresponding to the preceding tax year, divided by 12. | ||
(c) For the purpose of the computation of property tax on | ||
the market value of the retail inventory of an owner who was not a | ||
retailer on January 1 of the preceding tax year, the chief appraiser | ||
shall estimate the amount described by Subsection (b)(2). In | ||
making the estimate required by this subsection, the chief | ||
appraiser shall use sales data, if available, generated by sales | ||
from the retailer's retail inventory in the preceding tax year. | ||
(d) Except for retail inventory, tangible personal property | ||
held by a retailer is appraised as provided by the other sections of | ||
this code. In the case of a retailer whose sales from the | ||
retailer's retail inventory are made predominately to other | ||
retailers, the chief appraiser shall appraise the retailer's retail | ||
inventory as provided by Section 23.12. | ||
(e) A retailer is presumed to be an owner of retail | ||
inventory on January 1 if, in the 12-month period ending on December | ||
31 of the preceding year, the retailer sold an item of retail | ||
inventory to a person other than a retailer. The presumption is | ||
not rebutted by the fact that a retailer has no item of retail | ||
inventory physically on hand for sale from the retailer's retail | ||
inventory on January 1. | ||
(f) The comptroller by rule shall adopt a retailer's retail | ||
inventory declaration form. Not later than April 15 of each year, | ||
or, in the case of a retailer who was not in business on January 1, | ||
not later than 30 days after commencement of business, each | ||
retailer shall file a declaration with the chief appraiser for each | ||
location at which the retailer's retail inventory to be appraised | ||
as provided by this section is located. The declaration is in | ||
addition to the rendition statement or property report filed by the | ||
retailer when rendering the retailer's retail inventory under | ||
Chapter 22. The declaration is sufficient to comply with this | ||
subsection if it sets forth: | ||
(1) the name and business address of each location at | ||
which the retailer's retail inventory to be appraised as provided | ||
by this section is located; | ||
(2) a statement that the retailer is the owner of | ||
retail inventory; and | ||
(3) the retailer's total annual sales, less sales at | ||
wholesale and sales to other retailers, for the 12-month period | ||
corresponding to the preceding tax year. | ||
(g) As provided by this subsection, the chief appraiser may | ||
examine the books and records of a retailer. A request made under | ||
this subsection must be made in writing, be delivered personally to | ||
the custodian of the records at a location at which the retailer | ||
conducts business, provide a period of not less than 15 days for the | ||
person to respond to the request, and state that the person to whom | ||
the request is addressed has the right to seek judicial relief from | ||
compliance with the request. In a request made under this section, | ||
the chief appraiser may examine: | ||
(1) documentation appropriate to allow the chief | ||
appraiser to ascertain the applicability of this section to the | ||
person; and | ||
(2) sales records to substantiate information set | ||
forth in the declaration filed by the retailer. | ||
(h) A retailer who fails to timely file a declaration under | ||
Subsection (f) in a tax year waives any right to have the retailer's | ||
retail inventory appraised as provided by this section in that tax | ||
year, and the chief appraiser shall appraise the retailer's retail | ||
inventory as provided by Section 23.12. | ||
(i) Section 23.123 applies to a declaration filed under this | ||
section in the same manner in which that section applies to a | ||
declaration filed as required by Section 23.121. | ||
SECTION 3. Chapter 171, Tax Code, is amended by adding | ||
Subchapter N to read as follows: | ||
SUBCHAPTER N. TAX CREDIT FOR BUSINESS AD VALOREM TAX PAYMENTS ON | ||
INVENTORY | ||
Sec. 171.701. DEFINITIONS. In this subchapter: | ||
(1) "Qualified entity" means a taxable entity that: | ||
(A) is a retailer; and | ||
(B) pays ad valorem taxes on retail inventory | ||
owned by the entity and located in this state. | ||
(2) "Retail inventory" and "retailer" have the | ||
meanings assigned by Section 23.1244. | ||
Sec. 171.702. ELIGIBILITY FOR CREDIT. A qualified entity | ||
is eligible to apply for a credit in the amount and under the | ||
conditions and limitations provided by this subchapter against the | ||
tax imposed under this chapter. | ||
Sec. 171.703. AMOUNT OF CREDIT; LIMITATIONS. (a) Subject | ||
to Subsection (b), the total amount of the credit under this | ||
subchapter is equal to the difference between the following | ||
amounts: | ||
(1) the amount of the ad valorem taxes paid by the | ||
qualified entity during the period on which a report is based that | ||
are derived from the taxable value of the entity's retail | ||
inventory; and | ||
(2) the amount of the ad valorem taxes the entity would | ||
have paid during the period described by Subdivision (1) on the | ||
taxable value of the entity's retail inventory if the taxable value | ||
of that inventory were the amount determined under Section | ||
23.1244(b)(2). | ||
(b) A qualified entity is not eligible for a credit under | ||
this subchapter for a year in which the amount described by | ||
Subsection (a)(2) is greater than the amount described by | ||
Subsection (a)(1). | ||
(c) The total credit claimed for a report, including the | ||
amount of any carryforward under Section 171.704, may not exceed | ||
the amount of franchise tax due for the report after all other | ||
applicable tax credits. | ||
Sec. 171.704. CARRYFORWARD. (a) If a qualified entity is | ||
eligible for a credit that exceeds the limitation under Section | ||
171.703(c), the entity may carry the unused credit forward for not | ||
more than three consecutive reports. | ||
(b) A carryforward is considered the remaining portion of a | ||
credit that cannot be claimed in the current year because of the | ||
limitation under Section 171.703(c). A carryforward is added to | ||
the next year's installment of the credit in determining the | ||
limitation for that year. A credit carryforward from a previous | ||
report is considered to be used before the current year | ||
installment. | ||
Sec. 171.705. APPLICATION FOR CREDIT. (a) A qualified | ||
entity must apply for a credit under this subchapter on or with the | ||
report for the period for which the credit is claimed. | ||
(b) A qualified entity shall file with a report on which the | ||
credit is claimed any information required by the comptroller to | ||
sufficiently demonstrate that the entity is eligible for the | ||
credit. | ||
(c) The burden of establishing eligibility for and the value | ||
of the credit is on the qualified entity. | ||
Sec. 171.706. SALE OR ASSIGNMENT OF CREDIT. (a) A | ||
qualified entity that earns a credit under this subchapter may sell | ||
or assign all or part of the credit, and any entity to which all or | ||
part of the credit is sold or assigned may sell or assign all or part | ||
of the credit to another entity. There is no limit on the total | ||
number of transactions for the sale or assignment of all or part of | ||
the total credit authorized under this subchapter, however, | ||
collectively all transferred and retained credits claimed for a | ||
period are subject to the limitation under Section 171.703(c). | ||
(b) An entity that sells or assigns a credit under this | ||
section and the entity to which the credit is sold or assigned shall | ||
jointly submit written notice of the sale or assignment to the | ||
comptroller on a form promulgated by the comptroller not later than | ||
the 30th day after the date of the sale or assignment. The notice | ||
must include: | ||
(1) the date of the sale or assignment; | ||
(2) the amount of the credit sold or assigned; | ||
(3) the names and federal tax identification numbers | ||
of the entity that sold or assigned the credit or part of the credit | ||
and the entity to which the credit or part of the credit was sold or | ||
assigned; and | ||
(4) the amount of the credit owned by the selling or | ||
assigning entity before the sale or assignment, and the amount the | ||
selling or assigning entity retained, if any, after the sale or | ||
assignment. | ||
(c) The sale or assignment of a credit in accordance with | ||
this section does not extend the period for which a credit may be | ||
carried forward and does not increase the total amount of the credit | ||
that may be claimed. | ||
Sec. 171.707. RULES. The comptroller shall adopt rules | ||
necessary to implement this subchapter. | ||
SECTION 4. The legislature finds that, because of the many | ||
different types of retail inventory and the differences in the | ||
period of time that items comprising different types of retail | ||
inventory are held for sale by retailers before being sold to | ||
purchasers, it is difficult to establish a method that reliably | ||
determines the market value of such inventory. Accordingly, the | ||
legislature has enacted Section 23.1244, Tax Code, to specify a | ||
fair and accurate method for determining the appraised value of | ||
retail inventory that recognizes the unique characteristics of | ||
different types of retail inventory that may affect its value. | ||
SECTION 5. Section 23.1244, Tax Code, as added by this Act, | ||
applies only to an ad valorem tax year that begins on or after the | ||
effective date of this Act. | ||
SECTION 6. Subchapter N, Chapter 171, Tax Code, as added by | ||
this Act, applies only to a report originally due on or after | ||
January 1, 2021. | ||
SECTION 7. This Act takes effect January 1, 2020. |