HB 77

By: Cain
  H.B. No. 77
  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.