85R11692 CJC-F
	By: Button	H.B. No. 2589

	A BILL TO BE ENTITLED
	AN ACT
	relating to the appraisal for ad valorem tax purposes of tangible
	personal property held for sale at retail.
	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
	SECTION 1.  Sections 23.12(a) and (f), Tax Code, are amended
	to read as follows:
	(a)  Except as provided by Sections 23.121, [23.1241,]
	23.124, 23.1241, 23.1244, and 23.127, the market value of an
	inventory is the price for which it would sell as a unit to a
	purchaser who would continue the business. An inventory shall
	include residential real property which has never been occupied as
	a residence and is held for sale in the ordinary course of a trade or
	business, provided that the residential real property remains
	unoccupied, is not leased or rented, and produces no income.
	(f)  The owner of an inventory other than a dealer's motor
	vehicle inventory as that term is defined by Section 23.121, [a
	dealer's heavy equipment inventory as that term is defined by
	Section 23.1241, or] a dealer's vessel and outboard motor inventory
	as that term is defined by Section 23.124, a dealer's heavy
	equipment inventory as that term is defined by Section 23.1241, a
	retail inventory as that term is defined by Section 23.1244, or a
	retail manufactured housing inventory as that term is defined by
	Section 23.127 may elect to have the inventory appraised at its
	market value as of September 1 of the year preceding the tax year to
	which the appraisal applies by filing an application with the chief
	appraiser requesting that the inventory be appraised as of
	September 1. The application must clearly describe the inventory
	to which it applies and be signed by the owner of the inventory. The
	application applies to the appraisal of the inventory in each tax
	year that begins after the next August 1 following the date the
	application is filed with the chief appraiser unless the owner of
	the inventory by written notice filed with the chief appraiser
	revokes the application or the ownership of the inventory changes.
	A notice revoking the application is effective for each tax year
	that begins after the next September following the date the notice
	of revocation is filed with the chief appraiser.
	SECTION 2.  Subchapter B, Chapter 23, Tax Code, is amended by
	adding Section 23.1244 to read as follows:
	Sec. 23.1244.  RETAILER'S RETAIL INVENTORY; VALUE. (a) In
	this section:
	(1)  "Chief appraiser" means the chief appraiser for
	the appraisal district in which a retailer's retail inventory is
	located.
	(2)  "Declaration" means a retailer's retail inventory
	declaration form adopted by the comptroller under this section.
	(3)  "Retailer" means a person who is engaged in the
	business in this state of selling retail inventory. For purposes of
	this section, the term does not include a bank, savings bank,
	savings and loan association, credit union, or other finance
	company. In addition, for purposes of taxation of a person's retail
	inventory in a tax year, the term does not include a person who
	renders the person's retail inventory in that tax year by filing a
	rendition statement or property report under Chapter 22.
	(4)  "Retail inventory" means all tangible personal
	property that a retailer holds for sale in this state during a
	12-month period and for which the retailer is not otherwise
	entitled to an exemption from taxation. For purposes of this
	section, the term does not include:
	(A)  real property; or
	(B)  inventory that qualifies for appraisal under
	Section 23.121, 23.124, 23.1241, or 23.127.
	(5)  "Sales price" means the total amount of money paid
	or to be paid to a retailer for the purchase of an item of retail
	inventory.
	(6)  "Total annual sales" means the total of the sales
	price from every sale from a retailer's retail inventory for a
	12-month period.
	(b)  For the purpose of the computation of property tax,  the
	market value of a retailer's retail inventory on January 1 is the
	total annual sales, less inventory shrinkage, sales at wholesale,
	and sales to retailers, for the 12-month period corresponding to
	the preceding tax year, divided by 12.
	(b-1)  Notwithstanding Subsection (b), for the nine-year
	period beginning January 1, 2018, and ending December 31, 2026, the
	market value of a retailer's retail inventory is the greater of:
	(1)  the market value of that retail inventory on
	January 1 of the applicable tax year as determined under Subsection
	(b); or
	(2)  the following percentages of the market value of
	that inventory on January 1 of the applicable tax year as determined
	under Section 23.12:
	(A)  for the 2018 tax year, 90 percent of the
	market value;
	(B)  for the 2019 tax year, 80 percent of the
	market value;
	(C)  for the 2020 tax year, 70 percent of the
	market value;
	(D)  for the 2021 tax year, 60 percent of the
	market value;
	(E)  for the 2022 tax year, 50 percent of the
	market value;
	(F)  for the 2023 tax year, 40 percent of the
	market value;
	(G)  for the 2024 tax year, 30 percent of the
	market value;
	(H)  for the 2025 tax year, 20 percent of the
	market value; and
	(I)  for the 2026 tax year, 10 percent of the
	market value.
	(c)  For the purpose of the computation of property tax on
	the market value of the retail inventory of an owner who was not a
	retailer on January 1 of the preceding tax year, the chief appraiser
	shall estimate the market value of the retailer's retail inventory.
	In making the estimate required by this subsection, the chief
	appraiser shall extrapolate using sales data, if any, generated by
	sales from the retailer's retail inventory in the preceding tax
	year.
	(c-1)  Notwithstanding Subsection (c), for the nine-year
	period beginning January 1, 2018, and ending December 31, 2026, the
	chief appraiser shall determine the market value of the retail
	inventory of an owner who was not a retailer on January 1 of the
	preceding tax year in the manner prescribed by Subsection (b-1) and
	shall use the estimated market value determined under Subsection
	(c) as the market value of the retail inventory for purposes of
	Subsection (b-1)(1).
	(c-2)  This subsection and Subsections (b-1) and (c-1)
	expire December 31, 2026.
	(d)  Except for retail inventory, tangible personal property
	held by a retailer is appraised as provided by the other sections of
	this code. In the case of a retailer whose sales from the
	retailer's retail inventory are made predominately to other
	retailers, the chief appraiser shall appraise the retailer's retail
	inventory as provided by Section 23.12.
	(e)  A retailer is presumed to be an owner of retail
	inventory on January 1 if, in the 12-month period ending on December
	31 of the preceding year, the retailer sold an item of retail
	inventory to a person other than a retailer.  The presumption is
	not rebutted by the fact that a retailer has no item of retail
	inventory physically on hand for sale from the retailer's retail
	inventory on January 1.
	(f)  The comptroller by rule shall adopt a retailer's retail
	inventory declaration form. Not later than April 15 of each year,
	or, in the case of a retailer who was not in business on January 1,
	not later than 30 days after commencement of business, each
	retailer shall file a declaration with the chief appraiser for each
	location at which the retailer's retail inventory to be appraised
	as provided by this section is located. The declaration is
	sufficient to comply with this subsection if it sets forth:
	(1)  the name and business address of each location at
	which the retailer's retail inventory to be appraised as provided
	by this section is located;
	(2)  a statement that the retailer is the owner of
	retail inventory; and
	(3)  the market value of the retailer's retail
	inventory for the current tax year as computed under Subsection
	(b).
	(g)  As provided by this subsection, the chief appraiser may
	examine the books and records of a retailer. A request made under
	this subsection must be made in writing, be delivered personally to
	the custodian of the records at a location at which the retailer
	conducts business, provide a period of not less than 15 days for the
	person to respond to the request, and state that the person to whom
	the request is addressed has the right to seek judicial relief from
	compliance with the request. In a request made under this section,
	the chief appraiser may examine:
	(1)  documentation appropriate to allow the chief
	appraiser to ascertain the applicability of this section to the
	person; and
	(2)  sales records to substantiate information set
	forth in the declaration filed by the retailer.
	(h)  A retailer who fails to timely file a declaration under
	Subsection (f) in a tax year waives any right to have the retailer's
	retail inventory appraised as provided by this section in that tax
	year.
	(i)  Section 23.123 applies to a declaration filed under this
	section in the same manner in which that section applies to a
	declaration filed as required by Section 23.121.
	SECTION 3.  The changes in law made by this Act apply only to
	an ad valorem tax year that begins on or after the effective date of
	this Act.
	SECTION 4.  This Act takes effect January 1, 2018.