America's Property Tax Advisor

Texas Senate Approves Tax Bills


Two major tax bills were approved by the Texas Senate in March. One lowers the threshold requiring a referendum for cities and counties to raise property taxes. The other establishes a plan to phase out the margins tax on businesses.


Property Tax Reform & Relief Act of 2017
(Senate Bill 2)


State Senators approved SB 2 by a vote of 18-12.


Under current law, a tax ratification election only takes place if local governments raise taxes 8% or more and if taxpayers petition to force a referendum. SB 2 lowers that to 5% and removes the petition requirement for an election, thus making an election automatic if a city, county, or special district exceeds the 5% rollback rate. Sponsor Senator Paul Bettencourt initially proposed a 4% property tax increase as the rollback rate for the automatic tax referendums but raised it to 5% when the bill was being considered in the Finance Committee.


SB 2 creates a Property Tax Administration Advisory Board in the comptroller's office to oversee the appraisal process. It statutorily sets the filing deadline for all property tax protests as May 15. In counties with populations of 120,000 or more, SB 2 establishes specialized Appraisal Review Board panels to evaluate particular categories of complex taxpayer protests.


In addition, SB 2 increases the value of properties that have the option of going to binding arbitration from $3 million to $5 million; and raises the exemption for filing income-producing business personal property from $500 in value to $2,500. Finally, it prohibits local governments from being able to challenge the value of an entire class of property.


SB 2 generated a great deal of emotional press with mayors and other officials claiming the bill removes local control. However, no local control is actually removed from a tax entity. Quite the opposite is true. What the bill does is require tax entities to notify taxpayers of proposed tax rate increases that will yield more than 5% revenue over the previous year, not including new construction and conduct an election to receive approval for the increase. Tax entities often collect well over 5% each year when taxes from new construction is factored in.


State Representative Dennis Bonnen, who chairs the Ways and Means Committee, has filed a similar bill in the House.


Future Cuts and Possible Elimination
of Margins Tax (Senate Bill 17)


The Margins Tax is set up to tax businesses on their gross receipts. SB 17, which passed the Senate 23-7, seeks to eventually lower and ultimately do away with the unpopular tax.


SB 17 would leave the tax untouched for the upcoming two-year budget. However, it could cut the tax in future years as long as the comptroller expects state revenue to grow by at least 5%. Once that threshold is met, the bill would dedicate half the excess revenue to tax relief.


"It has no impact on the current budget, it only triggers when revenue is available," Dale Craymer, president of the Texas Taxpayers and Research Association said at a committee hearing last month.


Critics say they are worried that the 5% threshold is too low and will be easily triggered. "This revenue scheme would mean fewer resources for Texas communities that need them," Dick Lavine, senior fiscal analyst with the Center for Public Policy Priorities said.


The bill now goes to the Texas House of Representatives.