87th Session Recap - Taxes

H.B. 1195 - Relating to the franchise tax treatment of certain loans and grants made under the federal Coronavirus Aid, Relief, and Economic Security Act.

This law change impacts the forgiveness of a loan made under the Paycheck Protection Program for franchise tax purposes.

An update to Texas franchise tax law was needed to ensure businesses are not required to pay state franchise taxes on certain forgivable loans and grants provided by the federal government for COVID response/relief.  A similar exemption on these specific loan forgiveness programs were made at the federal level for income tax purposes, but a similar change was needed in state law for franchise tax purposes.  This new law ensures that Texas businesses who received loan and then forgiveness of those federal relief loans will not be penalized under Texas’ franchise tax laws.

This law went effective on May 5, 2021.

S.B. 296 - Relating to the date by which a seller must provide resale and exemption certificates to the comptroller in connection with a sales and use tax audit.

The changes from S.B. 296 could impact some manufactured and modular home manufacturers who sell homes/units either out of state or to pass through resale buyers, such as oil field operators.

Resale or exemption certificates are currently required to be in the possession of the seller at the time the nontaxable transaction occurs. If the seller is not in possession of these certificates within 60 days from the date of written notice from the comptroller, the deductions claimed by the seller are disallowed.

S.B. 296 amends the Tax Code to allow a seller to deliver the certificates to the comptroller at an alternative date. The bill specifically extends the current deadline to 90 days from the date of written notice and allows for a subsection extension made by agreement with the comptroller.

This bill went into effect on June 7, 2021.

S.B. 1449 - Relating to the exemption from ad valorem taxation of income-producing tangible personal property having a value of less than a certain amount.

This law change simply increases the exemption threshold for tax purposes for income producing tangible personal property from the previous $500 amount up to $2,500.  This increase could positively impact our industry by eliminating some property for taxing purposes.  And while most manufactured homes owned by a community and operated as a rental will still exceed even the new $2,500 threshold, it might still exclude some lower tax valued older homes in some communities.

The bill is effective on January 1, 2022.