Commissioner's Rules
Adopted New 19 TAC Chapter 61, School Districts, Subchapter AA, Commissioner's Rules on School Finance, §61.1019, Additional State Aid for Ad Valorem Tax Credits under the Texas Economic Development Act
Attachments:
I. Statutory Citation (PDF)
II. Text of Adopted New 19 TAC Chapter 61, School Districts, Subchapter AA, Commissioner's Rules on School Finance, §61.1019, Additional State Aid for Ad Valorem Tax Credits under the Texas Economic Development Act (PDF)
SUMMARY:
The rule action presented in this item will be filed as adopted with the Texas Register under the commissioner's rulemaking authority. This item adopts new 19 TAC Chapter 61, School Districts, Subchapter AA, Commissioner's Rules on School Finance, §61.1019, Additional State Aid for Ad Valorem Tax Credits under the Texas Economic Development Act. The adopted new rule allows the commissioner to implement and administer the provisions of the Texas Education Code (TEC), §42.2515, which authorizes an eligible school district to receive state aid equal to the amount of all qualified economic development tax credits credited against the district's ad valorem taxes in a school year under the Texas Tax Code, Chapter 313, Subchapter D.
STATUTORY AUTHORITY:
TEC, §42.2515.
EFFECTIVE DATE:
April 23, 2009.
BACKGROUND INFORMATION AND SIGNIFICANT ISSUES:
Pursuant to the Texas Tax Code, Chapter 313 (the Texas Economic Development Act), school districts may offer appraised value limitations on property and tax credits to certain capital-intensive industries that meet dollar and job creation requirements in order to encourage large-scale capital investments in Texas.
The TEC, §42.2515, authorizes the commissioner to adopt rules to implement and administer the provision of additional state aid, including aid for school districts otherwise ineligible for state aid, in order to offset tax credits issued by school districts under the Texas Economic Development Act.
Adopted new 19 TAC §61.1019, Additional State Aid for Ad Valorem Tax Credits under the Texas Economic Development Act, implements the provisions of the TEC, §42.2515. Specifically, the adopted new rule addresses general provisions; provides definitions, eligibility criteria, and the procedures for filing a request for aid; describes the forms to be used to make a request for aid; and establishes limitations on state aid, the reasons for which and method by which erroneous tax credits will be recovered, the timeline for submission of application requests, and the method of payment of state aid.
In response to public comment, a new subsection (f), describing limitations of tax credits, was added at adoption. Subsections (f) through (i), as filed as proposed, were relettered accordingly, and subsection (c)(2) was amended to correct a cross reference to a relettered subsection.
In addition, a technical edit was made in newly relettered subsection (g). The word given was replaced with the word due to ensure that a school district could not receive state aid for an amount of tax credit the district gave a taxpayer in excess of what the taxpayer was actually due.
FISCAL IMPACT:
The Texas Education Agency (TEA) has determined that there are no additional costs to persons or entities required to comply with the rule action; however, there will be economic benefits for school districts as a result of the new rule. The rule action does not have any additional fiscal implications to the state beyond what the authorizing statute requires. Although it is known that the costs to the state, required by the authorizing statute, for the provision of aid for ad valorem tax credits will be significant, it is not yet known exactly what those costs will total.
The new rule will result in school districts' gaining additional revenue from the state. School districts granting tax credits pursuant to the Texas Economic Development Act will be fully reimbursed by the TEA. For each school year, a school district, including a district that is otherwise ineligible for state aid, is entitled to state aid in an amount equal to the amount of all tax credits credited against ad valorem taxes of the district in that year. The amount of funds to be received by school districts under this credit is not currently known.
The TEA has determined there is no direct adverse economic impact for small businesses and microbusinesses; therefore, no regulatory flexibility analysis, specified in Texas Government Code, §2006.002, is required.
The new rule could result in an economic benefit to all business types, including small businesses. Economic benefits would come from receipt of a Texas Economic Development Act tax credit or from ancillary economic activity generated by Texas Economic Development Act qualifying business projects. However, the exact amount of cost savings to small businesses as a result of the new rule cannot be known.
PUBLIC AND STUDENT BENEFIT:
The adopted new rule will provide additional state aid to school districts for tax credits applied against the school districts' ad valorem taxes. The provisions of this rule will provide an incentive to school districts to provide tax credits to businesses, thus encouraging capital investment, job creation, and an expansion of the state's ad valorem property tax base. The adopted new rule will benefit students with a dollar-for-dollar replacement (subject to annual limitations) of the ad valorem tax dollars school districts credit to qualifying businesses.
PROCEDURAL AND REPORTING IMPLICATIONS:
To take advantage of the ad valorem tax credit and receive an adjustment to its state aid, a school district must submit a Request for Additional State Aid for Ad Valorem Tax Credit form to the TEA.
The Request for Additional State Aid for Ad Valorem Tax Credit form requires information on the school district's tax rates, the taxpayer receiving tax credits, the amount of state aid being sought and the year for which it is being sought, and documents dealing with the provision of the tax credits. The form also requires the applicant school district to attach a completed TEA-provided electronic spreadsheet that allows the applicant school district to calculate the amount of the tax credit to be provided to the taxpayer and details the plans for the period the school district will be subject to the value limitation agreement.
LOCALLY MAINTAINED PAPERWORK REQUIREMENTS:
The locally maintained paperwork requirements resulting from the adopted new rule correspond with and support the stated procedural and reporting implications.
PUBLIC COMMENTS:
The public comment period began December 19, 2008, and ended January 20, 2009. Following is a summary of public comments received and corresponding agency responses regarding the proposed new 19 TAC Chapter 61, School Districts, Subchapter AA, Commissioner's Rules on School Finance, §61.1019, Additional State Aid for Ad Valorem Tax Credits under the Texas Economic Development Act.
Comment: A partner at Moak, Casey & Associates commented that the rule's provisions may need to be clarified to indicate whether certain credit limitations would apply only to maintenance and operations (M&O) taxes paid by a taxpayer or to the total taxes paid by the taxpayer, including both M&O and interest and sinking fund taxes.
Agency response: The agency agrees. A new subsection (f) has been added to clarify that the credit limitations would apply to the total taxes paid.
Comment: A partner at Moak, Casey & Associates commented that a school district should be permitted to submit other evidence of a tax refund paid when an initial tax credit is not reflected in a taxpayer's tax statement.
Agency response: The agency agrees. Subsections (d)(2)(D) and (d)(3)(B) explicitly permit a school district to submit as evidence of a tax refund paid either a copy of the tax bill sent to the taxpayer or "other proof that the school district has reimbursed the tax credit to the taxpayer."
Comment: A partner at Moak, Casey & Associates inquired whether the application and accompanying spreadsheet specified in rule were available online.
Agency response: The application form, including the necessary template, will be updated as needed and made available online on the TEA state funding webpage.
ALTERNATIVES:
None.
OTHER COMMENTS AND RELATED ISSUES:
None.
Staff Members Responsible:
Adam Jones, Deputy Commissioner, Finance and Administration
Shirley Beaulieu, Associate Commissioner, Finance / Chief Financial Officer
Lisa Dawn-Fisher, Deputy Associate Commissioner, School Finance
For additional information, email rules@tea.state.tx.us.