HB2194 - 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.

  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 enr [Text truncated for display. Full text available on Congress.gov.]