HomeMy WebLinkAboutWS Item 02 - Super Freeport Tax ExemptionA briefing on Tax on Goods in Transit per House Bill 621, Super Freeport tax exemption
Letter to Taxing Entities
July 24, 2007
Page 2
Before that can happen, the governing body of the taxing unit must conduct a public hearing. If
the governing body of a taxing unit provides for the taxation of the goods -in -transit as provided
by this bill, the exemption prescribed 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 will apply to that taxing unit.
Based on the aforementioned, if your taxing unit does not act to tax these goods, they will
become eligible for this exemption on January 1, 2008. In order to assist you in making this
decision, our office has prepared an estimate of the amount of value potentially lost in all
jurisdictions if you allow the goods to receive the exemption. This estimate is based on 2007
values and a conservative interpretation of how this new law may impact inventories not now
subject to the current "Freeport" requirements. I have also included a summary of how much
value was lost in your jurisdiction to the existing Freeport law in 2007.
Remember, if you choose to tax these goods, you must act before January 1, 2008. This
includes allotting enough time to conduct the required public hearing. I am providing this letter
to help your agency make an informed decision on this exemption. The Tarrant Appraisal
District has no position on this issue and will administer the exemption according to your wishes.
Please review the information we have provided. Please inform Tarrant Appraisal District of any
action taken. If you have any questions feel free to contact me.
;Sin ely,
Marshal
Executive Director
Chief Appraiser
JRM:mm
Encl.: Text of HB 621
Estimate of current and potential losses HB 621
Goods in Transit Estimates
Entity
Estimated Goods in Transit
2007 Freeport Exemption
Total Estimated
Loss
Loss
Loss
Counties
2,960,999,867
3,559,347,884
6,520,347,751
Tarrant
Total
2,960,999,867
3,559,347,884
6,520,347,751
Cities
300,990,670
324,045,679
625,036,349
Arlington
1,835,180
2,754,807
4,589,987
Azle
Bedford'
2,917,353
349,595
3,266,948
Benbrook"
28,526,098
19,727,882
�
48,253,980
1,766,394
Blue Mound'
819,297
947,09,
453,628
1,294,446
ille'y`
840,818
5,91 1,312
18,660,283
24,571,596
Crowley*
Dalworthington Gardens
1,563,980
1,141,684
2,705,664
0
Ed ecliff Village*
g g
20,979,886
0
4,824,669
25,804,555
Euless
0
311,810
Everman'
311,810
1,295,285
6,114,398
Forest Hill"
4,819,113
1,616,837,557
2,319,177,803
3,936,015,361
Fort Worth
168,839,602
552,828,162
721,667,764
Grapevine
Haltom City
39,333,323140,259,511
21,931,100
61,264,423
Haslet
68,981,428
71,278,083
Hurst"
11,405,296
5,297,123
16,702,419
3,208,520
Keller*
3,091,543
116,977
8,926,110
14,204,357
Kennedale
5,278,247
0
735,729
Lake Worth'
735,729
0
34,931
Lakeside
34,931
55,304,580
115,038,923
170,343,504
Mansfield
North Richland Hills
5,060,214
383,911
5,444,125
2,483,458
Pantego'
1,762,901
720,557
0
Pelican Bay
0
14,484,231
0
13,287,185
27,771,417
Richland Hills
0
0
River Oaks`
0
94,674,333
38,342,776
133,017,109
Saginaw
0
55,667
Sansom Park
55,667
5,849,126
34,470,212
Southlake
28,621,086
0
128,538
Watauga'
128,538
0
0
Westover Hills
0
00
Westworth Village`
0
19,950,373
42,669,869
White Settlement'
22,719,496
3,547,328,818
6,054,193,041
Total
2,506,864,219
School Districts
714,377,687
63,074,987
1,344,452,675
Arlington
3,368,717
6,233,303
6
9,602,020
Azle"
Birdville
91031,997
,
11 0,779,022
201,811,018
Carroll`
24,736,653
1,201,229
25,937,882
19,495,346
Castleberry'
4,981,776
14,513,570
24,915,241
32,928,564
Crowley
8,013,324
353,204,217
627,771,416
Eagle Mountain - Saginaw
274,567,199
52,923,134
99,091,769
Everman
46,168,635
786,105,213
1,371,988,157
Fort Worth
585,882,943
976,682,135
1,321,239,400
Grapevine-Colleyville
344,557,265
94,496,105
302,494,297
Hurst -Euless -Bedford
207,998,193
18,269,991
53,964,851
Keller"
35,694,859
6,371,447
10,110,382
Kennedale"
3,738,935
0
1,706,884
Lake Worth'
1,706,884
151,915,382
239,022,685
Mansfield
87,107,303
19,950,373
47,201,396
White Settlement`
27,251,023
3,247,635,349
5,798,818,742
Total
2,461,183,393
Special Districts
7,675,006
18,976,273
Emergency Services District
11,301,267
0
807,532
Fresh Water District
807,532
1942,471,536
3,478,654,689
Regional Water District
1,536,183,152
,
1,950,146,542
3,498,438,494
Total
1,548,291,951
" The freeport exemption is not currently recognized by this taxing entity.
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PerdueBrandonFielderColhs&Mott LLP-
ATTORNEYS AT LAW
4025 WOODLAND PARK BLVD., SUITE 300
P.O. BOX 13430
ARLINGTON, TEXAS 76094-0430
METRO 817-461-3344
FAX 817-860-6509
www.r)bfcm.com
Clients of the Firm
RE: New Exemption of "Goods in Transit"—Local Option to Tax
Dear Client:
In the 2007 session, the Texas Legislature passed HB 621. This bill was the implementing
legislation for a constitutional amendment that was passed several years ago. The bill is very similar to the
Freeport exemption passed many years ago, but it has a potentially larger impact as time goes on. This
letter is to inform you of your options to tax the goods subject to the new exemption and to provide you
with the forms and procedure to tax these goods if you choose. Our firm takes no position on the policy
question of whether or not to continue to tax the property that is subject to this new exemption. We
simply believe that the governing body of each of our clients should have the tools to make an informed
decision on behalf of the taxpayers they represent.
This new law passed without much scrutiny because it was a bracket bill that only affected one
county in Texas until the closing days of the legislative session. Then an amendment made the exemption
applicable statewide,
What is Exempted:?
This bill exempts goods, principally inventory, that are stored in a location that is not owned by the
owner of the goods and are transferred from that location to another location within 175 days. The goods
may be in the location for the purposes of assembling, storing, manufacturing, processing, or fabricating
purposes by the person who acquired or imported the property. Certain specific types of goods are
presently excluded from this exemption: 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. Petroleum products are defined to be only the immediate
derivatives of oil and natural gas, so some goods that you might think of as petroleum products may
actually be exempted from taxation by this new law.
What is the Impact on Your Tax Base?
At present, this new law will probably have a limited impact because most goods are kept in
facilities that are owned by the owners of the goods themselves. However, this may change rapidly. In
order to take advantage of this new law, many property owners may seek to transfer ownership of either
the goods or the facilities in which the goods are stored, manufactured, processed, etc. to legal entities
with different ownership. These types of paper changes could make the property exempt.
AMARILLO ARLINGTON AUSTIN HOUSTON LUBBOCK MIDLAND TYLER WICHITA FALLS
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What Can You Do?
The governing body of each taxing unit in the state may act to tax these goods in the year following
the year in which the governing body takes action. These goods will first become exempt in 2008. So if
you wish to continue to tax these types of goods in 2008, you must act to tax the goods before the end of
2007. You must inform all the appraisal districts in which your local government is located that you have
acted to tax these goods. A copy of the resolution, order, or ordinance is the best way to document your
decision to your appraisal district.
Before you act to tax these goods, you must hold a public hearing on the question of whether to tax
them or whether to let them become exempt. The legislature has prescribed no special procedures for this
hearing, so it may be held at a meeting of the governing body called for other purposes. The item must be
listed on the agenda for that meeting as an action item in compliance with the Open Meetings Act, but
there is no additional public notice required.
The legislature required that each taxing unit act in the manner required for official action by the
governing body of the taxing unit. For counties, this means that action must be taken by an order of the
commissioner's court. For cities, this means that action must be taken by an ordinance. For school
districts and other taxing units, this means that action should be taken by resolution. A sample order,
ordinance and resolution are attached to this letter.
Special Note for School Districts
The wealth lost to this exemption will be deducted from the taxable wealth of the school district as
determined by the Comptroller for purposes of calculating state aid. Until the hold harmless provisions of
House Bill 1 are removed, this will have little impact on the amount of state aid your school district
receives. At present, the Comptroller's wealth estimate affects only the additional four cents that a school
district may impose and the amount of certain types of facilities aid the district receives from the state
(existing debt allotment and instructional facilities allotment). So as the law exists today, a school district
will lose taxable wealth due to this exemption without an offsetting increase in state aid. Even if the
legislature restores the Comptroller's finding of taxable wealth to its previous role in state aid to school
districts, the effect of the additional state aid is not a dollar for dollar offset.
We hope that this letter and the attached forms will help you make an informed decision on behalf
of the taxpayers that you represent. If you should have any questions concerning this matter, please feel
free to call your attorney at your local office or call me in Houston.
Sincerely,
Robert Mott