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
 
 
 
A BILL TO BE ENTITLED
 
AN ACT
  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, [23.1241,]
  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, [a
  dealer's heavy equipment inventory as that term is defined by
  Section 23.1241, or] a dealer's vessel and outboard motor inventory
  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.
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