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AD Valorem Taxation of Certain Stored Property

 

The first called special session of the 82nd Legislature passed Senate Bill 1 that made comprehensive changes to the goods-in-transit exemption. Among the changes are time-sensitive amendments, summaries of which include: 

For a tax year that begins on or after Jan. 1, 2012, a taxing unit may not tax goods-in-transit unless the governing body takes official action on or after Oct. 1, 2011, to provide for the taxation of goods-in-transit. Official action to tax the property must be taken before Jan. 1 of the first tax year in which the governing body of the taxing unit proposes to tax the property. Before acting to tax the exempt property, the governing body must conduct a public hearing as required by the Texas Constitution, Article VIII, Section 1-n(d). Goods-in-transit made subject to taxation by a taxing unit remain so by that taxing unit until the unit by official action rescinds or repeals its previous action to tax the property. “Goods-in-transit” consist of tangible personal property stored under a contract of bailment in a public warehouse that is not owned or controlled by the owner of the personal property for 175 days or less. 

Under certain circumstances, a taxing unit that has pledged taxes to the payment of debt may continue to tax goods-in-transit if the taxing unit took action to tax such property before Oct. 1, 2011. 

Taxing units should consult with legal counsel about the new law, its implications and whether they should take official action by a certain date.

SB 1 from the 82nd 1st Call session

Bill History: http://www.capitol.state.tx.us/BillLookup/Text.aspx?LegSess=821&Bill=SB1

Text of Bill: http://www.capitol.state.tx.us/tlodocs/821/billtext/html/SB00001F.htm

Excerpt from bill:

ARTICLE 48. AD VALOREM TAXATION OF CERTAIN STORED PROPERTY SECTION 48.01. Subsection (a), Section 11.253, Tax Code, is amended by amending Subdivision (2) and adding Subdivisions (5) and (6) to read as follows: (2) "Goods-in-transit" means tangible personal property that: (A) is acquired in or imported into this state to be forwarded to another location in this state or outside this state; (B) is stored under a contract of bailment by a public warehouse operator [detained] at one or more public warehouse facilities [a location] in this state that are not in any way owned or controlled by [in which] the owner of the personal property [does not have a direct or indirect ownership interest] for the account of [assembling, storing, manufacturing, processing, or fabricating purposes by] the person who acquired or imported the property; (C) is transported to another location in this state or outside this state not later than 175 days after the date the person acquired the property in or imported the property into this state; and (D) does not include oil, natural gas, petroleum products, aircraft, dealer's motor vehicle inventory, dealer's vessel and outboard motor inventory, dealer's heavy equipment inventory, or retail manufactured housing inventory.

(5) "Bailee" and "warehouse" have the meanings assigned by Section 7.102, Business & Commerce Code.(6) "Public warehouse operator" means a person that:(A) is both a bailee and a warehouse; and(B) stores under a contract of bailment, at one or more public warehouse facilities, tangible personal property that is owned by other persons solely for the account of those persons and not for the operator's account.

 

SECTION 48.02. Section 11.253, Tax Code, is amended by amending Subsections (e) and (h) and adding Subsections (j-1) and (j-2) to read as follows: (e) In determining the market value of goods-in-transit that in the preceding year were [assembled,] stored[, manufactured, processed, or fabricated] in this state, the chief appraiser shall exclude the cost of equipment, machinery, or materials that entered into and became component parts of the goods-in-transit but were not themselves goods-in-transit or that were not transported to another location in this state or outside this state before the expiration of 175 days after the date they were brought into this state by the property owner or acquired by the property owner in this state. For component parts held in bulk, the chief appraiser may use the average length of time a component part was held by the owner of the component parts during the preceding year at a location in this state that was not owned by or under the control of the owner of the component parts in determining whether the component parts were transported to another location in this state or outside this state before the expiration of 175 days. (h) The chief appraiser by written notice delivered to a property owner who claims an exemption under this section may require the property owner to provide copies of property records so the chief appraiser can determine the amount and value of goods-in-transit and that the location in this state where the goods-in-transit were detained for storage [assembling, storing, manufacturing, processing, or fabricating purposes] was not owned by or under the control of the owner of the goods-in-transit. If the property owner fails to deliver the information requested in the notice before the 31st day after the date the notice is delivered to the property owner, the property owner forfeits the right to claim or receive the exemption for that year.

(j-1) Notwithstanding Subsection (j) or official action that was taken under that subsection before October 1, 2011, to tax goods-in-transit exempt under Subsection (b) and not exempt under other law, a taxing unit may not tax such goods-in-transit in a tax year that begins on or after January 1, 2012, unless the governing body of the taxing unit takes action on or after October 1, 2011, in the manner required for official action by the governing body, to provide for the taxation of the goods-in-transit. The official action to tax the goods-in-transit must be taken before January 1 of the first tax year in which the governing body proposes to tax goods-in-transit. Before acting to tax the exempt property, the governing body of the taxing unit must conduct a public hearing as required by Section 1-n(d), Article VIII, Texas Constitution. If the governing body of a taxing unit provides for the taxation of the goods-in-transit as provided by this subsection, the exemption prescribed by Subsection (b) does not apply to that unit. The goods-in-transit remain subject to taxation by the taxing unit until the governing body of the taxing unit, in the manner required for official action, rescinds or repeals its previous action to tax goods-in-transit or otherwise determines that the exemption prescribed by Subsection (b) will apply to that taxing unit.

(j-2) Notwithstanding Subsection (j-1), if under Subsection (j) the governing body of a taxing unit, before October 1, 2011, took action to provide for the taxation of goods-in-transit and pledged the taxes imposed on the goods-in-transit for the payment of a debt of the taxing unit, the tax officials of the taxing unit may continue to impose the taxes against the goods-in-transit until the debt is discharged, if cessation of the imposition would impair the obligation of the contract by which the debt was created.  

 

SECTION 48.03. Subdivision (2), Subsection (a), Section 11.253, Tax Code, as amended by this article, applies only to an ad valorem tax year that begins on or after January 1, 2012.

SECTION 48.04. (a) Except as provided by Subsection (b) of this section, this article takes effect January 1, 2012. (b) Section 48.02 of this article takes effect October 1, 2011.

The Comptroller’s updated goods-in-transit application form can be found at

www.window.state.tx.us/taxinfo/taxforms/50-758.pdf. (outside source)


For additional information, contact:

Office of School Finance 
Al Johnson
(512) 463-9260

al.johnson@tea.state.tx.us

Page last modified on 12/27/2011 03:12:56 PM.