Lowe Bill’s 6.72% Value Added Tax Waits Until 2030

The text as introduced · 2,306 words

89R873 BEF/MEW/TJB-D

By: Lowe
H.B. No. 2194

A BILL TO BE ENTITLED

AN ACT

relating to the repeal of or limitations on certain state and local

taxes, including school district maintenance and operations ad

valorem taxes, the enactment of state and local value added taxes,

and related school finance reform; imposing taxes.

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

ARTICLE 1. STATE VALUE ADDED TAX

SECTION 1.01. DEFINITIONS. In this article:

(1) "Input tax" means the aggregate amount of all

state and local value added taxes imposed under this Act that have

accrued with respect to services and property supplied to a

taxpayer during a calendar quarter and used or held for use by the

taxpayer in the ordinary course of the taxpayer's trade or

business.

(2) "Output tax" means the aggregate amount of all

state and local value added taxes imposed under this Act that have

accrued with respect to services and property supplied by a

taxpayer during a calendar quarter in the ordinary course of the

taxpayer's trade or business.

(3) "Taxpayer" means a person on whom the value added

tax is imposed.

(4) "Value added tax" means the tax imposed under

Section 1.02 of this article.

SECTION 1.02. VALUE ADDED TAX IMPOSED. A value added tax is

imposed on each person in this state who supplies any service or

property in the ordinary course of a trade or business in which the

person engages for profit.

SECTION 1.03. RATE OF TAX. The rate of the value added tax

is 6.72 percent of the taxpayer's taxable receipts from the supply

of services or property.

SECTION 1.04. DETERMINATION OF TAX PAYABLE. The total

amount of state and local value added taxes under this Act payable

by a taxpayer for a calendar quarter is the amount, if any, by which

the taxpayer's output tax exceeds the taxpayer's input tax.

SECTION 1.05. EXEMPTIONS. (a) The comptroller by rule

shall exempt from the value added tax:

(1) small businesses;

(2) governmental entities; and

(3) religious, educational, and public service

organizations.

(b) The comptroller shall refund the amount of any input tax

that has been accrued by an entity exempt under Subsection (a) of

this section.

SECTION 1.06. EXCLUSIONS. The comptroller by rule shall

exclude the following services and property from the value added

tax:

(1) monetary instruments, financial assets, and

investments;

(2) intercompany services;

(3) employment services;

(4) incidental transactions;

(5) transfers of common interests in property;

(6) services and property taxed by other law,

including Chapters 201 and 202, Tax Code; and

(7) services and property this state is prohibited

from taxing by federal law or the Texas Constitution.

SECTION 1.07. RULES. The comptroller shall adopt all rules

necessary to implement, administer, and enforce the state value

added tax and all local value added taxes under this Act.

SECTION 1.08. DISPOSITION OF REVENUE. All proceeds from

the collection of the value added tax shall be deposited to the

credit of the general revenue fund.

SECTION 1.09. EFFECTIVE DATE OF ARTICLE. This article

takes effect January 1, 2030.

ARTICLE 2. LOCAL VALUE ADDED TAXES

SECTION 2.01. LOCAL SALES AND USE TAXES PROHIBITED.

Notwithstanding any other law, a political subdivision may not

impose a sales or use tax on or after the effective date of this

article.

SECTION 2.02. LOCAL VALUE ADDED TAXES. (a) A political

subdivision that was authorized to impose a sales and use tax

immediately before the effective date of this article may impose a

local value added tax on and after the effective date of this

article.

(b) A local value added tax is administered, collected, and

enforced by the comptroller in the same manner as the state value

added tax. The tax applies to the supply of services or property in

the territory of the political subdivision.

(c) The comptroller shall allocate and remit to each

appropriate taxing jurisdiction proceeds from the collection of

local value added taxes by the comptroller.

SECTION 2.03. RATES OF LOCAL VALUE ADDED TAXES. (a) The

combined rate of all local value added taxes may not exceed two

percent at any location in the territory of a political

subdivision.

(b) The maximum combined rate provided by Subsection (a) of

this section does not apply to or include a school district

enrichment value added tax under Article 3 of this Act.

(c) On the effective date of this article, a political

subdivision may begin imposing the local value added tax at a rate

not to exceed the rate at which the political subdivision imposed a

sales and use tax immediately before the effective date of this

article. Subject to Subsection (a) of this section, the governing

body of a political subdivision that imposes a local value added tax

may adopt an order or ordinance changing the rate of or repealing

the tax imposed by the political subdivision.

SECTION 2.04. EFFECTIVE DATE OF ARTICLE. This article

takes effect January 1, 2030.

ARTICLE 3. SCHOOL DISTRICT ENRICHMENT VALUE ADDED TAX

SECTION 3.01. TAX AUTHORIZED. (a) A school district may

adopt or repeal a school district enrichment value added tax at an

election in which a majority of the qualified voters of the school

district approve the adoption or repeal of the tax.

(b) A school district enrichment value added tax is

administered, collected, and enforced by the comptroller in the

same manner as the state value added tax. The tax applies to the

supply of services or property in the territory of the school

district.

SECTION 3.02. MAXIMUM RATE. The rate of the school district

enrichment value added tax may not exceed 0.5 percent.

SECTION 3.03. USE OF TAX REVENUE BY SCHOOL DISTRICT. (a)

Revenue from the school district enrichment value added tax is for

the use and benefit of the school district. The revenue must be

used exclusively for school enrichment facilities and activities

and for the payment of the principal of and interest on debt

incurred to fund school enrichment facilities and activities.

(b) Revenue from the school district enrichment value added

tax may not be used for an expenditure or investment that is:

(1) necessary to comply with the legislature's duty

under Section 1, Article VII, Texas Constitution, to provide for

the general diffusion of knowledge and an efficient system of

public schools, including by providing funding for instructional

facilities; and

(2) eligible for funding through the Foundation School

Program.

SECTION 3.04. PLEDGE OF REVENUE. A school district may

pledge a portion of the revenue from the school district enrichment

value added tax for the payment of obligations issued to pay all or

part of the cost of a school enrichment project in the school

district.

SECTION 3.05. EFFECTIVE DATE OF ARTICLE. This article

takes effect January 1, 2030, but only if Section 4.01 of this Act

takes effect. If Section 4.01 of this Act does not take effect,

this article has no effect.

ARTICLE 4. SCHOOL DISTRICT MAINTENANCE AND OPERATIONS AD VALOREM

TAXES

SECTION 4.01. PROHIBITION ON IMPOSITION OF SCHOOL DISTRICT

MAINTENANCE AND OPERATIONS AD VALOREM TAXES. (a) Notwithstanding

any other law, a school district may not impose an ad valorem tax

for maintenance and operations purposes on or after January 1,

2030. To the extent of a conflict, this section controls over a

conflicting provision in a general or special law.

(b) The change in law made by this section does not affect

tax liability accruing before the effective date of this section.

(c) This section takes effect January 1, 2030, but only if

on or before that date a constitutional amendment to prohibit a

school district from imposing an ad valorem tax for maintenance and

operations purposes is approved by the voters. If such a

constitutional amendment is not approved by the voters on or before

that date, this section has no effect.

SECTION 4.02. REPORT. (a) The comptroller shall prepare a

report that recommends any change in constitutional or statutory

law needed to implement this Act.

(b) Not later than December 1, 2026, the comptroller shall

submit to the governor, lieutenant governor, speaker of the house

of representatives, and members of the legislature the report

required by Subsection (a) of this section.

(c) This section expires January 1, 2027.

SECTION 4.03. EFFECTIVE DATE OF ARTICLE. Except as

otherwise provided by this article, this article takes effect

September 1, 2025.

ARTICLE 5. SCHOOL FINANCE

SECTION 5.01. FOUNDATION SCHOOL PROGRAM FUNDING. (a)

Beginning with the 2030-2031 school year, the legislature shall

appropriate money to fund the Foundation School Program under

Chapter 48, Education Code, in an amount, excluding money collected

by a school district through the imposition of a tax, necessary to:

(1) comply with the legislature's duty under Section

1, Article VII, Texas Constitution, to provide for the general

diffusion of knowledge and an efficient system of public schools;

(2) achieve the state policy under Section 48.001,

Education Code, and the purposes of the Foundation School Program

under Section 48.002, Education Code;

(3) provide the basic allotment under Section 48.051,

Education Code, in an amount of at least $6,160 per student in

average daily attendance; and

(4) provide a minimal level of revenue to provide

school districts an opportunity to pursue locally funded enrichment

programs.

(b) This section takes effect January 1, 2030, but only if

Section 4.01 of this Act takes effect. If Section 4.01 of this Act

does not take effect, this section has no effect.

SECTION 5.02. EFFECT OF PROHIBITION ON SCHOOL DISTRICT

MAINTENANCE AND OPERATIONS TAX. (a) Article 4 of this Act does not

affect the authority of a school district to impose an enrichment

value added tax at a rate not to exceed 0.5 percent in accordance

with Article 3 of this Act for the purpose of providing additional

revenue to enrich the educational opportunities of students

enrolled in the district. The revenue attributable to the tax

described by this subsection is in addition to any money the

district receives from the state.

(b) A reference in the Education Code, the Tax Code, or any

other law to a school district's authority to impose a maintenance

tax or a maintenance and operations tax may not be construed in a

manner inconsistent with Article 4 of this Act or this section.

(c) This section takes effect January 1, 2030, but only if

Section 4.01 of this Act takes effect. If Section 4.01 of this Act

does not take effect, this section has no effect.

SECTION 5.03. STATE ASSISTANCE FOR TRANSITION TO SCHOOL

DISTRICT ENRICHMENT VALUE ADDED TAX. (a) For purposes of budgeting

for and funding of maintenance and operations and enrichment, the

commissioner of education shall assist school districts in

transitioning from the use of maintenance and operations tax

revenue to the use of state funding and enrichment value added tax

revenue.

(b) Not later than March 1, 2030, each school district shall

prepare and submit to the commissioner of education a transition

report certified by the comptroller that provides for the following

10 state fiscal years estimates regarding:

(1) budgets;

(2) sources of funding; and

(3) operating and capital expenditures.

(c) In the transition report prepared under Subsection (b)

of this section, a school district shall, in accordance with the

policy and purposes described by Sections 48.001 and 48.002,

Education Code, classify as "foundational" or "enrichment":

(1) each projected operating and capital expenditure

and the proportion of each current and projected debt; and

(2) the proportional amounts of current and projected

debts, based on the proposed uses for the revenue.

(d) Based on school districts' reports under Subsection (b)

of this section, the commissioner of education shall prepare and

present to the comptroller recommendations for refunding,

redeeming, or amending outstanding bonds for which school districts

pledged maintenance and operations tax revenue for payment.

(e) Notwithstanding any other law, the commissioner of

education shall provide state funding for the payment of any bonds

classified by a school district as a "foundational" bond under

Subsection (c) of this section. A school district assumes full

financial responsibility for any bond classified as an "enrichment"

bond.

(f) The commissioner of education shall annually prepare

and provide a report to the legislature and the comptroller

regarding funding under the Foundation School Program and the

transition by school districts to imposing a value added enrichment

tax. The report must include recommendations for legislative

action to facilitate the funding transitions required under this

Act while maintaining and improving the efficiency, quality, and

results of public education in this state.

(g) Subsection (e) of this section takes effect January 1,

2030, but only if Section 4.01 of this Act takes effect. If Section

4.01 of this Act does not take effect, Subsection (e) of this

section has no effect.

SECTION 5.04. EFFECTIVE DATE OF ARTICLE. Except as

otherwise provided by this article, this article takes effect

September 1, 2025.

ARTICLE 6. REPEALED PROVISIONS

SECTION 6.01. TAX CODE. (a) The following provisions of

the Tax Code are repealed:

(1) Chapter 142;

(2) Subtitles E, F, G, H, and J, Title 2; and

(3) Subtitle C, Title 3.

(b) The repeal of a provision by this section does not

affect tax liability accruing before the effective date of this

article. That liability continues in effect as if this article 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. EDUCATION CODE. (a) The following

provisions of the Education Code are repealed:

(1) Sections 45.0032, 48.255, 48.2551, 48.2552,

48.2553, 48.256, 48.257, and 48.275; and

(2) Chapter 49.

(b) This section takes effect only if Section 4.01 of this

Act takes effect. If Section 4.01 of this Act does not take effect,

this section has no effect.

SECTION 6.03. EFFECTIVE DATE OF ARTICLE. Except as

otherwise provided by this article, this article takes effect

January 1, 2030.