HBA-JRA C.S.H.B. 1218 76(R)BILL ANALYSIS Office of House Bill AnalysisC.S.H.B. 1218 By: Craddick Ways & Means 5/6/1999 Committee Report (Substituted) BACKGROUND AND PURPOSE Currently, tangible personal property is subject to taxation by the state. C.S.H.B. 1218 defines "goods-in-transit" and exempts tangible personal property that consists of goods-in-transit from ad valorem taxation. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Subchapter B, Chapter 11, Tax Code, by adding Section 11.252, as follows: Sec. 11.252. TANGIBLE PERSONAL PROPERTY IN TRANSIT. (a) Defines "goods-intransit" in this section as property that is exempt from taxation under Section 1-n, Article VIII, Texas Constitution. (b) Entitles a person to an exemption from taxation of the appraised value of the portion of the person's property that consists of goods-in-transit. (c) Provides that, to determine the taxable value of the property, such an exemption is subtracted from the market value of the property determined under Section 23.12 (Inventory). (d) Requires the chief appraiser to determine the appraised value of goods-in-transit, except as provided by Subsections (f) and (g). Requires the chief appraiser to determine the percentage of the market value of inventory or property owned by the property owner in the preceding calendar year that was contributed by goods-in-transit. Sets forth the method by which the percentage is determined. (e) Sets forth the method by which the market value of goods-in-transit that in the preceding year were assembled, manufactured, repaired, maintained, processed, or fabricated in this state or used by the person who acquired or imported the property in the repair or maintenance of aircraft operated by a certificated air carrier is determined. (f) Requires the chief appraiser to calculate the percentage of the market value described in Subsection (d) for the portion of the year in which the property owner was engaged in transporting goods-in-transit to another location in this state or out of this state if the property owner was not engaged in transporting goods-in-transit to other locations in this state or out of this states for the entire preceding year. (g) Sets forth the method by which the market value of goods-in-transit qualified for exemption is determined if the property owner or the chief appraiser demonstrates that the method provided by Subsection (d) significantly understates or overstates the market value of such property. (h) Authorizes the chief appraiser to require, by written notice, the property owner to provide copies of property records to determine the amount and value of goods-in-transit and whether the location in this state where the goods-in-transit were detained for assembling, storing, manufacturing, processing, or fabricating purposes was not owned or under the control of the owner of the goods-in-transit. Provides that the property owner forfeits the right to claim or receive the exemption for that year if the property owner fails to deliver the information requested within 31 days of receiving the notice. (i) Defines "petroleum products" for the purposes of Section 1-n, Article VIII, Texas Constitution. (j) Provides that property that meets the requirements of Section 1-n(a), Article VIII, Texas Constitution, constitutes goods-in-transit regardless of whether the person who owns the property on January 1 is the person who transports it to another location in this state or out of this state. SECTION 2. Amends Section 11.437(a), Tax Code, to make conforming changes. SECTION 3. Amends Section 22.01(e), Tax Code, to make conforming changes. SECTION 4. Reenacts and amends Section 403.302(d), Government Code, as amended by Section 44, Chapter 1039, Section 63, Chapter 1040, and Section 27, Chapter 1071, Acts of the 75th Legislature, Regular Session, 1997, to make conforming changes. SECTION 5. Provides that this Act takes effect January 1, 2000, and makes application of this Act prospective only if the constitutional amendment proposed by the 76th Legislature, Regular Session, 1999, to exempt from ad valorem taxation all tangible personal property held at certain locations only temporarily for assembling, manufacturing, processing, or other commercial purposes, takes effect. SECTION 6. Emergency clause. COMPARISON OF ORIGINAL TO SUBSTITUTE The substitute modifies the original in the caption to make a conforming change. The substitute deletes SECTIONS 1, 2, 3, 5, and 6 of the original. SECTION 1 of the original would have amended Section 11.01, Tax Code, to provide that for a tax year that begins after December 31, 1999, tangible personal property is not taxable by the state. The original would have provided that a provision of this code or another law that would otherwise apply to the taxation of tangible personal property for a tax year that begins after December 31, 1999, has no effect on and after January 1, 2000; and provided that the exemptions of tangible personal property from taxation by the state do not apply to personal property taxable under Section 1(g), Article VIII, Texas Constitution (Development or Redevelopment of Property; Ad Valorem Tax Relief And Issuance of Bonds And Notes). SECTION 2 of the original would have amended Sections 22.01 and 22.05, Tax Code, to make conforming and nonsubstantive changes. SECTION 3 of the original would have amended Section 23.12(a), Tax Code, to make conforming and nonsubstantive changes. SECTION 5 of the original would have amended Article 4.01, Insurance Code, to make conforming changes. SECTION 6 of the original would have repealed the following sections of the Tax Code: 11.02 (Intangible Personal Property), 11.14 (Tangible Personal Property not Producing Income), 11.145 (Income-Producing Tangible Personal Property Having Value of Less Than $500), 11.15 (Family Supplies), 11.16 (Farm Products), 11.161 (Implements of Farming or Ranching), 11.25 (Marine Cargo Containers Used Exclusively in International Commerce), 11.251 (Tangible Personal Property Exempt), 11.271 (Offshore Drilling Equipment not in Use), 11.437 (Exemption for Cotton Stored in Warehouse), 21.02 (Tangible Personal Property Generally), 21.021 (Vessels and Other Watercraft), 21.03 (Interstate Allocation), 21.031 (Allocation of Taxable Value of Vessels and Other Watercraft Used Outside This State), 21.04 (Railroad Rolling Stock), 21.05 (Commercial Aircraft), 21.06 (Intangible Property Generally), 21.07 (Intangibles of Certain Transportation Businesses), 21.08 (Intangibles of Certain Financial Institutions), 22.04(b) and (c) (Report by Bailee, Lessee, or Other Possessor), 22.07 (Inspection of Property), 23.12(f) (Inventory), 23.121 (Dealer's Motor Vehicle Inventory; Value), 23.122 (Prepayment of Taxes by Certain Taxpayers), 23.123 (Declarations and Statements Confidential), 23.124 (Dealer's Vessel and Outboard Motor Inventory; Value), 23.1241 (Dealer's Heavy Equipment Inventory; Value), 23.1242 (Prepayment of Taxes by Heavy Equipment Dealers), 23.125 (Prepayment of Taxes by Certain Taxpayers), 23.126 (Declarations and Statements Confidential), 23.127 (Retail Manufactured Housing Inventory; Value), and 23.128 (Prepayment of Taxes by Manufactured Housing Retailers), Subchapter B, Chapter 24 (Railroad Rolling Stock Central Appraisal), and Subchapter B, Chapter 33 (Seizure of Personal Property Delinquency); and repealed Section 89.003 (Rendition of Certain Personal Property for ad Valorem Taxation), Finance Code. The substitute adds a new SECTION 1 which amends Subchapter B, Chapter 11, Tax Code, by adding Section 11.252, to entitle a person to an exemption from taxation of the appraised value of the portion of the person's property that consists of goods-in-transit. Please also see the Section-bySection Analysis portion of this document. The substitute adds a new SECTION 2 which amends Section 11.437(a), Tax Code, to make conforming changes. The substitute adds a new SECTION 3 which amends Section 22.01(e), Tax Code, to make conforming changes. The substitute modifies the original in SECTION 4 which reenacts and amends Section 403.302(d), Government Code, as amended by Section 44, Chapter 1039, Section 63, Chapter 1040, and Section 27, Chapter 1071, Acts of the 75th Legislature, Regular Session, 1997, to restore and amend the existing language of Subdivision (4) to make a conforming change, rather than deleting Subdivisions (4) and (8). The substitute redesignates SECTIONS 7 (effective date) and 8 (emergency clause) of the original as SECTIONS 5 and 6 and makes conforming changes.