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Texas Legislative Update- Other Tax Bill Summaries

by DMA Staff | Jun 08, 2017
DMA-Texas-Legislative-Update-June 8 2017
DuCharme, McMillen & Associates, Inc. (DMA) provides this information on tax bills other than property tax bills enacted by the 85th Texas Legislature Regular Session. The bills summarized below have been passed by both houses of the Legislature and sent to the Governor. Governor Greg Abbott has until June 18, 2017, to sign or veto the bills, or allow them to become law without his signature. The content and status of any specific bill are available here.

Bills that are noted to take effect “immediately upon passage” will be effective on the date Governor Abbott signs the bill or on June 18, 2017, if he does not sign or veto the bill.

Cigarette Tax and Other Tobacco Products Tax
SB 1390 (Hinojosa) makes the following changes:
  • amends Tax Code §154.210(a) to change the return filing date for cigarette taxes filed by distributors from the last day of each month to the 25th day of each month;
  • amends Tax Code §155.111(a) to change the return filing date for cigars and other tobacco products taxes filed by distributors from the last day of each month to the 25th day of each month;
  • adds a new statute, §154.026, to Chapter 154, Tax Code, to exempt cigarettes that are labeled for experimental use purposes in compliance with 27 C.F.R. Section 40.232 and that are sold directly by a manufacturer to a research facility in this state; and
  • amends Health & Safety Code §161.604, which currently provides for the adjustment of the fee imposed on the sale, use, consumption or distribution of non-settling manufacturer cigarettes, by specifying that the rate of the fee adjustment made by the Comptroller takes effect February 1 of the year in which the adjusted fee rate is determined and remains in effect until January 31st of the following year.
The Governor signed the bill on May 18, 2017, and the bill takes effect September 1, 2017. The changes to Tax Code §§154.210 and 155.111 apply only to a distributor's report originally due on or after September 1, 2017. [Note: This bill was one of the Comptroller’s legislative proposals.]

General
SB 625 (Kolkhorst, Lois) adds Government Code §403.0241 to require the Comptroller to create and maintain a “Public Information Database” on the Internet that will contain certain prescribed information for all special purpose districts in Texas that impose ad valorem tax or sales/use tax. Among the information to be included is the following:
  • the contact information for a person representing the tax assessor-collector, including a mailing address and telephone number, if the special purpose district contracts with a tax assessor-collector;
  • the special purpose district's Internet website address, if any;
  • the rate of any sales and use tax the special purpose district imposes; and
  • the table of ad valorem tax rates for the most recent tax year for a special purpose district that imposes ad valorem tax.
The enrolled bill was sent to the Governor on May 26, 2017, and is to take effect on September 1, 2017. The Comptroller is to create and post the database on the Internet by September 1, 2018.

SB 1095 (Taylor, Larry) amends Tax Code §111.009 and §111.105 to extend the deadline to file a petition for redetermination or a request for a refund hearing from 30 days to 60 days and would conform the deadline to file a motion for rehearing to the deadline generally applicable to state agencies as provided by the Texas Administrative Procedure Act. The enrolled bill was sent to the Governor on May 28, 2017, and is to take effect September 1, 2017. The change in deadline for a petition for redetermination applies to a notice of determination issued on or after September 1, 2017. The change in deadline for a request for a refund hearing applies to a letter of refund denial issued on or after September 1, 2017. The change in deadline for motions for rehearing applies to an order or decision signed on or after September 1, 2017. [Note: This bill was one of the Comptroller’s legislative proposals.]

SJR 6 (Zaffirini, Judith) proposes a constitutional amendment authorizing the legislature to require a court to provide notice to the Attorney General of a challenge to the constitutionality of a state statute if the party raising the challenge notifies the court in a petition, motion or other pleading of the challenge; and to prescribe a reasonable period not to exceed 45 days from the date of the notice prohibiting the court from entering a judgment holding the statute unconstitutional. The senate resolution was enrolled on May 23, 2017, and the constitutional amendment will be subject to voters’ approval at the election to be held on November 7, 2017. [Note: This senate resolution applies to any statute, but a constitutional challenge to a statutory tax provision is common in tax suits.]

Franchise Tax
HB 2126 (Button, Angie) amends Tax Code §171.002, which excludes telecommunications providers from being eligible for the lower wholesaler/retailer franchise tax rate, to clarify that the provision of telecommunications services, does not include the selling of telephone prepaid calling cards. The Governor signed the bill on May 29, 2017, and the bill takes effect on January 1, 2018. [Note: This bill was one of the Comptroller’s legislative proposals.]

HB 3254 (Phillips, Larry) amends Tax Code §171.1011(g-7) to modify the definition of qualified courier and logistic company by replacing the statutory reference under which the company must be registered as a motor carrier or broker. The bill replaces the current statutory requirement that registration be under the unified carrier registration system as defined by Transportation Code §643.001, with the registration requirement under the motor vehicle registration system established under 49 U.S.C. §14504a or a similar federal registration program that replaces that system. The enrolled bill was sent to the Governor on May 30, 2017, and is to take effect on January 1, 2018.

HB 3992 (Murphy, Jim) amends Tax Code §171.071 to expand the franchise tax exemption currently granted to a farmers’ cooperative society incorporated under Chapter 51, Agriculture Code, to also apply to a cooperative whose single member is a farmers’ cooperative described in Section 521(b)(1), Internal Revenue Code, that has at least 500 farmer-fruit grower members. The bill provides that it is a “clarification of existing law”. The enrolled bill was sent to the Governor on May 30, 2017, and is to take effect immediately upon passage.

HB 4002 (Bonnen, Dennis) modifies the definition of “production” for Cost of Goods Sold purposes by eliminating “installation” from the definition. The bill provides that the change is a clarification of existing law. The Governor signed the bill on June 1, 2017, and the bill takes effect on September 1, 2017. [Note: This bill was one of the Comptroller’s legislative proposals.]

SB 550 (Campbell, Donna) amends Tax Code §171.908 to allow a franchise tax credit established for eligible costs and expenses incurred in the certified rehabilitation of certified historic structures, which are currently authorized to be sold or assigned, to be applied to offset a premium tax imposed under Chapter 221, 222, 223, or 224, Insurance Code. The purchasers or the assignees of the franchise tax credit that are subject to the eligible insurance premium tax may claim all or part of the credit against their premium taxes. Any restrictions or requirements imposed by Chapter 171, Tax Code, relating to the establishment of the credit and the sale or assignment of the credit continue to apply. An entity claiming all or part of a credit as authorized by this subsection is not required to pay any additional retaliatory tax levied under Chapter 281, Insurance Code, as a result of claiming that credit. The Governor signed the bill on May 4, 2017, and the bill takes effect on May 4, 2017.

Hotel Occupancy Taxes
HB 1896 (Bohac, Dwayne) amends Tax Code §351.007 (Municipal Hotel Occupancy Tax) and Tax Code §352.0031 (County Hotel Occupancy Tax) to update the “preexisting contract” provisions therein. The bill specifies that:
  • an increase to a city or county hotel occupancy tax rate does not apply to the right to the use or possession of a room under a contract if the contract was executed before the effective date of the rate increase and provides that tax payment will be at the rate in effect at the time the contract was executed. The prior contract provision does not apply if the contract is subject to change or modification by reason of the tax rate increase; and
  • the imposition of new city or county hotel occupancy tax does not apply to a room rented under an existing contract signed before the effective date of the tax even if the room rental may be subject to a state hotel occupancy tax or another local hotel occupancy tax. The prior contract provision does not apply if the existing contract is subject to change or modification by reason of the imposition of the new tax.
The Governor signed the bill on May 29, 2017, and the bill takes effect on September 1, 2017.

SB 686 (Uresti, Carlos) amends Tax Code §352.002(a)(16) to clarify or update statutory language to retain Real County’s eligibility to impose a county hotel occupancy tax. The enrolled bill was filed without the Governor’s signature, and it takes effect on May 29, 2017.

SB 799 (Rodriguez, Jose) amends Tax Code §352.002(a)(2) to clarify or update statutory language to retain El Paso County’s eligibility to impose a county hotel occupancy tax. The enrolled bill was filed without the Governor’s signature, and it takes effect on May 29, 2017.

SB 1086 (Seliger, Kel) adds Tax Code §156.155 to prohibit a state agency from posting on a public Internet website information that identifies the taxable receipts of an individual business that is contained in or derived from a record, report, or other document required to be provided for state hotel occupancy tax purposes. Such information collected or maintained by a state agency is public and accessible under the Texas Public Information Act and the exceptions under Subchapter C of the Texas Public Information Act do not apply to the information. The Governor signed the bill on May 18, 2017, and the bill takes effect on May 18, 2017.

SB 1221 (Watson, Kirk) amends Chapter 351, Tax Code, to require a municipality that imposes a city hotel occupancy tax to report to the Comptroller by February 20 of each year the following information:
  • the city hotel occupancy tax rate;
  • the rate of the tax imposed by the municipality for sports and community venue projects under Subchapter H, Chapter 334, Local Government Code, if applicable;
  • the revenue amount collected during the municipality’s preceding fiscal year from city hotel occupancy taxes (both Chapter 351, Tax Code and Chapter 334, Local Government Code); and
  • the amount and percentage of city hotel occupancy tax revenue allocated for certain permitted uses.
The Governor signed the bill on June 1, 2017, and the bill takes effect on June 1, 2017. The Comptroller will be required to prescribe the reporting form by January 1, 2018, and cities will be required to submit the initial report by February 20, 2018.

Miscellaneous Gross Receipts Tax
SB 559 (Hancock, Kelly) modifies provisions in Chapter 182, Tax Code, to specify that the miscellaneous gross receipts tax is imposed on each utility company that “makes a sale to an ultimate consumer” in an incorporated city or town having a population of more than 1,000. The bill provides that the changes to the law are “a clarification of existing law”. The Governor signed the bill on May 23, 2017, and the bill takes effect on May 23, 2017. [Note: This bill was one of the Comptroller’s legislative proposals.]

Motor Fuel Taxes
SB 1120 (Zaffirini, Judith) amends Tax Code §162.014 to add “compressed natural gas” and “liquefied natural gas” to the list of fuels that are prohibited from being taxed by a political subdivision. The Governor signed the bill on May 10, 2017, and bill takes effect on May 10, 2017. [Note: This bill was one of the Comptroller’s legislative proposals.]

SB 1557 (Kolkhorst, Lois) make various changes to Chapter 162, Tax Code, relating to motor fuel purchased for export, as follows:
  • amends Tax Code §162.012(a) to add a presumption of taxability of gasoline and diesel fuel purchased by a person who claims an exemption based on export but who sells the gasoline or diesel fuel in Texas. The presumption that tax is due to Texas may be overcome by operation of current law, which is the submission of proof of tax payment to the destination state or proof that the transaction is exempt in the destination state;
  • amends Tax Code §162.101 and §162.201 to specify that tax is due from the seller who sells gasoline and diesel fuel to a person who claims an exemption based on export (to another state or foreign country) but who does not hold a supplier, distributor, importer, and exporter license;
  • amends Tax Code §162.101 and §162.201 to provide that if a person who holds one of the requisite licenses and who claims the export exemption but has the purchased gasoline or diesel fuel delivered to a location in Texas, the person who redirected the delivery is liable for tax on gasoline and diesel fuel not exported;
  • amends Tax Code §162.104 and §162.204 to restate that the exemption for export applies only if the bill of lading indicates the destination state and the supplier collects the destination state tax and deletes or repeals provisions that provide otherwise;
  • adds §162.1155 and §162.2165 to require a person who purchases or removes gasoline or diesel fuel tax free for export to another state or foreign country but who sells gasoline or diesel fuel in Texas before export to file a report with the Comptroller. The report requires certain specific information, including the bill of lading number issued at the terminal; the terminal control number; the date of removal from the terminal; and any other information that the Comptroller requires. If gasoline or diesel fuel is sold more than one time in Texas before export, each seller is required to file the report that requires the same types of information;
  • amends Tax Code §162.401 to impose an additional penalty on a person who fails to report a subsequent sale in Texas of tax-free motor fuel purchased for export. The additional penalty is $200 for each sale that is not reported, but the additional penalty will not be assessed if the person files an amended report including the sale within 180 days from the due date of the original report covering the sale;
  • imposes an additional penalty on a person who redirects the delivery of gasoline or diesel fuel purchased under the claim of export exemption to a location in Texas and fails to pay the tax. The additional penalty is equal to five times the amount of the tax due on the motor fuel or $2,000, whichever is greater; and
  • amends provisions in Chapter 26, Water Code, to transfer liability for the fee imposed on the delivery of certain petroleum products upon withdrawal from bulk storage from each operator of a bulk facility to each supplier.
The enrolled bill was sent to the Governor on May 26, 2017, and is to take effect on January 1, 2018. The bill states that the changes made to Tax Code §§162.101 and 162.201, Tax Code, are “a clarification of existing law”. [Note: This bill was one of the Comptroller’s legislative proposals.]

Motor Vehicle Sales/Use Tax
HB 897 (Ashby, Trenton) amends Tax Code §152.001(7) to expand the definition of “public agency” to include an open-enrollment charter school, which would allow the school to be eligible to fall within a current exemption on its purchase of a motor vehicle. The enrolled bill was sent to the Governor on May 30, 2017, and is to take effect on September 1, 2017.

HB 2067 (Oliveira, Rene) amends Tax Code §152.0475(c) to change the registration of a related motor vehicle finance company from an annual registration to a one-time registration that remains in effect until revocation by the holder or the Comptroller. The Governor signed the bill on May 29, 2017, and the bill takes effect on May 29, 2017.

Sales/Use Tax
HB 2475 (Davis, Sarah) amends Tax Code §151.3101 to allow a nonprofit corporation or association that qualifies under Tax Code §151.3101(a)(3) or an educational, religious, law enforcement association or charitable organization that qualifies under Tax Code §151.3101(a)(5) to retain the amusement services exemption for the provision of a touring Broadway production through a contract with a non-exempt entity if:
  • the contract with the non-exempt entity is for a term of at least five years and provides for at least five presentations each year; and
  • the touring Broadway production is held at a location that the exempt entity owns or leases for a term of at least one year.
The enrolled bill was sent to the Governor on May 25, 2017, and is to take effect on September 1, 2017.

HB 4038
(Bohac, Dwayne) amends Tax Code §151.359 relating to qualifying data centers. In addition to making a minimum capital investment, a data center must create at least 20 qualifying jobs. The bill expands the definition of “qualifying job” by including a new employment position staffed by a third-party employer if a written contract exists between the third-party employer and a qualifying owner, qualifying operator, or qualifying occupant that provides that the employment position is permanently assigned to an associated qualifying data center. The Governor signed the bill on June 1, 2017, and the bill takes effect on June 1, 2017. The change applies to all certified data centers, regardless of whether the certification occurred before, on or after the effective date of the bill.

HB 4042 (Paddie, Chris) amends Tax Code §151.461(5)(I) to rename “Temporary Charitable Auction Permit” to “Temporary Auction Permit” to conform the name to changes made to Chapter 53, Alcoholic Beverage Code, which expand the eligibility for an annual auction permit to include a person or group of persons who are subject to recordkeeping requirements under Chapter 254, Election Code. The enrolled bill was sent to the Governor on May 27, 2017, and is to take effect on September 1, 2017.

HB 4054 (Murphy, Jim) amends Tax Code §151.314 (Food and Food Products) as follows:
  • exempts bakery items sold by a bakery, regardless of whether the items are heated by the consumer or seller or served with plates or other eating utensils;
  • defines the term “bakery” to mean a retail location that primarily sells bakery items from a display case or counter, predominantly for consumption off the premises;
  • exempts bakery items sold at a retail location other than bakery without plates or other eating utensils; and
  • retains the definition of “bakery items” to mean bread, rolls, buns, biscuits, bagels, croissants, pastries, doughnuts, Danish, cakes, tortes, pies, tarts, muffins, bars, cookies, tortillas, and similar items.
The Governor signed the bill on June 1, 2017, and the bill takes effect on September 1, 2017.

SB 745 (Kolkhorst, Lois) transfers and redesignates Tax Code §151.057 (Services by Employees) as Tax Code §151.3503, which effectively makes the current tax exclusions tax exemptions and shifts the burden of proof to taxpayers. The new statute (§151.3503) provides as follows:
  • restates the tax exclusion for services performed by employees for their employer, which previously was in Tax Code §151.057(1);
  • restates the tax exclusion for services performed by professional employer organizations (staff leasing services) that was previously in Tax Code §151.057(3);
  • provides for the tax exclusion for services performed by temporary employment services but
    • clarifies that the person to whom temporary employment service is provided is a “host” employer and defines “host employer” to mean “the employer who owns, manages, or controls the property or worksite where an employee of a temporary employment service performs a service”;
    • makes an exception to the current requirement that an employer must provide all supplies and equipment necessary to perform the service by providing that the temporary employment service company may provide personal protective equipment required pursuant to a federal law or regulation; and
    • adds requirements that the host employer:
      • may not rent, lease, purchase or otherwise acquire for use the supplies and equipment (other than personal protective equipment) from the temporary employment service or from an entity that is a member of an affiliated group of which the temporary employment service is also a member; and
      • has the sole right to supervise, direct, and control the work performed by the employees of the temporary employment service as necessary to conduct the host employer’s business or comply with any licensure, statutory, or regulatory requirements applicable to the host employer; and
    • defines the term “affiliated group” by reference to Tax Code §171.0001 The definition provided by Tax Code §171.0001 is: “a group of one or more entities in which a controlling interest is owned by a common owner or owners, either corporate or noncorporate, or by one or more of the member entities”.
The enrolled bill was sent to the Governor on May 28, 2017, and is to take effect on September 1, 2017. The changes apply only to a service commenced on or after September 1, 2017. [Note: This bill was one of the Comptroller’s legislative proposals.]

SB 1083 (Perry) amends Tax Code §151.0039(b) to provide that a taxable insurance service does not include:
  • a service performed by a certified public accountancy firm (as defined by Occupations Code §901.002), if less than 1% of the firm’s total revenue in the prior calendar year is from services in Texas that would otherwise constitute a taxable insurance service as defined by the sales tax statute; or
  • a service performed on behalf of a certified public accountancy firm by an owner of the firm or a member of the firm's affiliated group, if less than 1% of the owner's or member's total revenue in the prior calendar year is from services in Texas that would otherwise constitute a taxable insurance service as defined by the sales tax statute. The term “affiliated group” means a group of one or more entities in which a controlling interest is owned by a common owner or owners, either corporate or noncorporate, or by one or more of the member entities.
The Governor signed the bill on May 22, 2017, and the bill takes effect on January 1, 2018.

Sales/Use Tax - Local
HB 2182 (Reynolds, Ron) amends Local Government Code §387.003 and §387.007 to provide that in determining the combined tax rate of all local sales and use taxes for purposes of an election to create a county assistance district or the imposition of a sales and use tax by a county assistance district, the following are not considered to be included in the territory of the proposed district or the area proposed to be added to the district: (1) rights-of-way; and (2) any area in which a county facility is located and in which no person has a place of business to which a sales tax permit has been issued. The enrolled bill was sent to the Governor on May 30, 2017, and is to take effect immediately upon passage.

HB 3045 (Dale, Tony) amends Chapter 505, Local Government Code, to provide that a municipality that imposes a sales and use tax for a Type B development corporation may reduce or increase the tax rate by a majority of the voters of the municipality voting at an election held for that purpose in the same manner and by the same procedure as the municipality imposed the tax. The enrolled bill was sent to the Governor on May 30, 2017, and is to take effect immediately upon passage.

HB 3046 (Dale, Tony) amends Tax Code §321.409 to extend municipalities’ use of a combined ballot proposition to modify (lower, repeal, or increase) any dedicated or special purpose municipal sales tax to any municipal sales tax. The application of current law requires two separate ballot propositions. The enrolled bill was sent to the Governor on May 26, 2017, and is to take effect immediately upon passage.

SB 1727 (Birdwell, Brian) amends Chapter 775, Health and Safety Code, to authorize an emergency services district to exclude certain territories from the applicability of any proposed tax instead of excluding certain territories from the election and the applicability of any proposed tax; and to modify emergency services districts’ election procedures relating to the adoption of a local sales and use tax. It requires that the ballot at the election be prepared to permit voting for or against the proposition and to use the following language: "The adoption of a local sales and use tax in (name of district) at a rate not to exceed (proposed tax rate) percent in any location in the district." The enrolled bill was sent to the Governor on May 27, 2017, and is to take effect immediately upon passage.

Severance Taxes
HB 2277 (Darby, Drew) amends Tax Code §201.057 (relating to the temporary exemption or tax reduction of certain high cost gas) as follows:
  • updates the provision that high-cost gas is gas as described by 15 U.S.C. §3317 (Natural Gas Policy Act of 1978), as that section “existed” on January 1, 1989 (rather than “exists” as it is currently written);
  • eliminates “all gas produced from oil wells or gas wells within a commission approved co-production project” from the definition of “high-cost gas” and makes conforming changes throughout the statute;
  • specifies that a determination that gas is high-cost natural gas for purposes of the Natural Gas Policy Act of 1978 (15 U.S.C. §§3301 et seq.) is a certification that the gas is high-cost gas for purpose of this exemption;
  • retains the provision that to qualify for the tax reduction, the person responsible for paying the tax must apply to the Comptroller and the application must contain a report of drilling and completion costs incurred for each well on a form and in the detail required by the Comptroller. However, with respect to the drilling and completion costs, the bill
    • provides as soon as practical after March 1 of each year, the Comptroller is to determine the median drilling and completion cost for all high-cost wells for which an application for a tax reduction was made during the previous state fiscal year by using the drilling and completion cost data required to be reported by taxpayers in their applications and that the median drilling and completion cost is fixed as of the date of the Comptroller's determination; and
    • prohibits the drilling and completion costs reported on the application to be amended after March 1 of the year following the state fiscal year in which the required application was made;
  • provides that if tax is paid before the commission’s certification of a well as high-cost gas well, the person who remitted the tax is entitled to the refund of tax paid in excess of the tax amount due if it had received the tax reduction on gas produced the 24 consecutive calendar months immediately preceding the month in which the application for certification that the Comptroller approved was filed with the commission. In connection with the refund, the bill
    • specifies that the person entitled to a refund must apply to the Comptroller for a refund within one year after the date the Comptroller approves the application for a tax reduction; and
    • eliminates current language in the statute to reference the right to take a credit, including the provision that would allow a producer to demonstrate that it does not have sufficient tax liability to claim the credit within five years from the date the application for the credit is made and the Comptroller’s determination as to what amount of the credit may not be claimed within that five years.
The Governor signed the bill on June 1, 2017, and the bill takes effect on September 1, 2017. [Note: This bill was one of the Comptroller’s legislative proposals.]

HB 3232 (Darby, Drew) amends Tax Code §201.351 (gas production tax) and Tax Code §202.301 (oil production tax) to allow taxpayers to amend tax returns without incurring a penalty if:
  • the original report due was timely filed;
  • the tax due on the original report was timely paid;
  • the additional tax due on the amended report does not exceed 25% of the tax due on the original report;
  • any errors identified by the Comptroller on the amended or original report that could affect the amount of tax due on that report are resolved within 60 days from the report filing date; and
  • the amended report is filed within 730 days from the original report due date and remits the full amount of the additional tax due with the amended report.
The enrolled bill was sent to the Governor on May 25, 2017, and is to take effect on January 1, 2018. The changes apply to an amended report filed with the Comptroller on or after January 1, 2018.

Unclaimed Property
SB 561 (Hancock, Kelly) adds Subchapter A-1 to Chapter 1109, Insurance Code, to require an insurer to: compare its in-force life insurance policies, annuity contracts, and retained asset accounts against the United States Social Security Administration’s Death Master File at least semiannually to identify potential Death Master File matches and to make certain good faith efforts to locate the beneficiary of a policy that resulted from a Death Master File match. Insurers have three years from the time a Death Master File match is confirmed and an attempt and failure to locate a beneficiary is made before proceeds would be considered unclaimed property. The bill provides that unclaimed proceeds do not include any statutory interest under Insurance Code §1103.104 (Interest of Proceeds).The Governor signed the bill on May 19, 2017, and the bill takes effect on September 1, 2017.