TITLE 19. EDUCATION

PART 2. TEXAS EDUCATION AGENCY

CHAPTER 61. SCHOOL DISTRICTS

SUBCHAPTER AA. COMMISSIONER'S RULES ON SCHOOL FINANCE

19 TAC §61.1019

The Texas Education Agency (TEA) proposes an amendment to §61.1019, concerning school finance. The proposed amendment would align the issuance of additional state aid for ad valorem tax credits under the Texas Education Code (TEC), §42.2515, with Texas Tax Code, Chapter 313.

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. School districts that have active agreements under the Texas Tax Code, Chapter 313, and that have companies subject to tax credits must net those credits against taxes paid.

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 Tax Code, Chapter 313.

Section 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 rule addresses the procedures for filing a request for aid and describes the forms to be used to make a request for aid.

The proposed amendment would update subsections (d)(2)(D) and (d)(3)(B) to require school districts to provide to the TEA a copy of the tax bill sent to the taxpayer showing that the taxes imposed on companies with agreements under the Texas Tax Code, Chapter 313, are net of the tax credit (rather than requiring the company to pay full taxes and then issuing a reimbursement to the company in the amount of the tax credit). Other proof, such as documentation of a reimbursement check in the amount of the tax credit, will no longer be accepted. The proposed amendment would align the issuance of additional state aid for ad valorem tax credits under the TEC, §42.2515, with Texas Tax Code, Chapter 313.

The proposed amendment would also update subsection (j) to remove the requirement for payments of additional state aid for ad valorem tax credits to be based on the schedule of monthly payments prescribed by the TEC, §42.259. This would allow the payment of additional state aid for ad valorem tax credits to be delivered to school districts without consideration of the schedule, mitigating any cash flow issues created by the changes in subsections (d)(2)(D) and (d)(3)(B).

In addition, technical edits would be made to remove information relating to dates that have passed and correct cross references to statute.

The rule currently requires school districts to submit to the TEA a copy of the tax bill sent to the taxpayer. The proposed amendment would require school districts to provide a copy of the tax bill showing that the Texas Tax Code, Chapter 313, tax credit is deducted from the total taxes imposed. No other proof would be accepted to ensure that taxes imposed on companies with agreements under the Texas Tax Code, Chapter 313, are net of the tax credit.

The proposed amendment would have no new locally maintained paperwork requirements. However, school districts are required to work with their local tax assessor/collector to ensure that taxes imposed on companies with agreements under the Texas Tax Code, Chapter 313, are net of the tax credit.

FISCAL NOTE. Leo Lopez, associate commissioner for school finance/chief school finance officer, has determined that for the first five-year period the amendment is in effect, there will be no fiscal implications for state or local government as a result of enforcing or administering the amendment. While the TEA does not anticipate a fiscal impact to additional state aid for ad valorem tax credits under the TEC, §42.2515, school districts with agreements under the Texas Tax Code, Chapter 313, may experience temporary cash flow issues between the time they collect their taxes (which would be net of the tax credit) and the receipt of additional state aid under the TEC, §42.2515. The proposed amendment to subsection (j) would attempt to mitigate this issue for districts that can apply quickly. There is no effect on local economy for the first five years that the proposed amendment is in effect; therefore, no local employment impact statement is required under Texas Government Code, §2001.022.

PUBLIC BENEFIT/COST NOTE. Mr. Lopez has determined that for each year of the first five years the amendment is in effect the public benefit anticipated as a result of enforcing the amendment will be continuing to 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. There is no anticipated economic cost to persons who are required to comply with the proposed amendment.

ECONOMIC IMPACT STATEMENT AND REGULATORY FLEXIBILITY ANALYSIS FOR SMALL BUSINESSES AND MICROBUSINESSES. 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.

REQUEST FOR PUBLIC COMMENT. The public comment period on the proposal begins April 21, 2017, and ends May 22, 2017. Comments on the proposal may be submitted to Cristina De La Fuente-Valadez, Rulemaking, Texas Education Agency, 1701 North Congress Avenue, Austin, Texas 78701. Comments may also be submitted electronically to rules@tea.texas.gov. A request for a public hearing on the proposal submitted under the Administrative Procedure Act must be received by the commissioner of education not more than 14 calendar days after notice of the proposal has been published in the Texas Register on April 21, 2017.

STATUTORY AUTHORITY. The amendment is proposed under the Texas Education Code, §42.2515, which 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 Tax Code, Chapter 313.

CROSS REFERENCE TO STATUTE. The amendment implements the Texas Education Code, §42.2515.

§61.1019.Additional State Aid for Ad Valorem Tax Credits under the Texas Economic Development Act.

(a) General provisions. This section implements the Texas Education Code (TEC), §42.2515 (Additional State Aid for Ad Valorem Tax Credits Under Texas Economic Development Act). In accordance with the TEC, §42.2515, a school district, including a school district that is otherwise ineligible for state aid under the TEC, Chapter 42, is entitled to state aid in an amount equal to the amount of all tax credits applied against ad valorem taxes of the school district in each year that tax credits were applied pursuant to the Texas Tax Code, Chapter 313, also known as the Texas Economic Development Act. School districts eligible to receive additional state aid under the TEC, §42.2515, must apply to the commissioner of education in order to receive additional state aid equal to the qualifying ad valorem tax credits issued under the Texas Tax Code, Chapter 313, Subchapter D, as that subchapter existed prior to repeal by House Bill (HB) 3390, 83rd Texas Legislature, Regular Session, 2013, subject to certain annual limitations.

(b) Definitions. The following phrases, words, and terms, when used in this section, will have the following meanings, unless the context clearly indicates otherwise.

(1) Eligible property--A term that has the meaning assigned in the Texas Tax Code, §313.024.

(2) Limitation on appraised value--A term that has the meaning assigned in the Texas Tax Code, Chapter 313. A school district may limit the appraised value on a qualified property for the purposes of ad valorem taxation for a period of eight tax years, beginning with the tax year that follows the applicable two-year qualifying time period. A limitation on appraised value applies only to the maintenance and operations portion of a school district's ad valorem tax rate. For each tax year in which the limitation on appraised value is in effect, the appraised value of the qualified property that is described in the written agreement between the school district and taxpayer for school district maintenance and operations ad valorem tax may not exceed the lesser of the market value of the property or the amount to which the school district has agreed, but the limited amount must be at least the minimum amount of limitation that is set for the applicable school district category in the Texas Tax Code, Chapter 313.

(3) Qualified property--A term that has the meaning assigned in the Texas Tax Code, §313.021(2).

(4) Tax credit--A credit that is made to a taxpayer who has applied for and received a limitation on appraised value under the Texas Tax Code, Chapter 313, from the school district that approved the limitation in an amount equal to the amount of ad valorem taxes paid to that school district that were imposed on the portion of the appraised value of the qualified property that exceeds the amount of the limitation agreed to by the governing body of the school district under the Texas Tax Code, §313.027(a)(2), in each year in the applicable qualifying time period.

(5) Tax year--The calendar year beginning January 1 in which the taxpayer incurred ad valorem taxes on the qualified property for which the taxpayer is entitled to a tax credit toward ad valorem taxes paid in that tax year.

(6) Texas Economic Development Act--The Texas Tax Code, Chapter 313.

(c) Eligibility for additional state aid.

(1) A school district may be eligible for additional state aid under the TEC, §42.2515, only pursuant to the provisions of the TEC, §42.2515, and the Texas Tax Code, Chapter 313.

(2) A school district must file an application on a form prescribed by the commissioner in accordance with the applicable timeline as described in subsection (i) of this section. A separate application must be made for each tax year for which additional state aid is being requested. An application, including the required supporting documentation described in subsections (d)(2) and (d)(3) of this section, as applicable, must be complete in order for the Texas Education Agency (TEA) to process it.

(3) A school district must be in compliance with the reporting requirements set forth in 34 Texas Administrative Code Chapter 9, Subchapter F (relating to Limitation on Appraised Value [and Tax Credits] on Certain Qualified Property), to be eligible for additional state aid under the TEC, §42.2515.

(d) Procedures for filing request for additional state aid for ad valorem tax credits.

(1) Method of filing. All requests for additional state aid under the TEC, §42.2515, must be filed by mail with the TEA, 1701 North Congress Avenue, Austin, Texas 78701, in accordance with instructions on the application.

(2) Information required for first year of tax credit. A school district's initial request for additional state aid under the TEC, §42.2515, must include:

(A) a completed Request for Additional State Aid for Ad Valorem Tax Credit application form, including the template that comprises a component of the application showing requested and projected additional state aid for each agreement under the Texas Tax Code, Chapter 313;

(B) a copy of the taxpayer's application to the school district for the tax credit, together with all required attachments to the application;

(C) a copy of the school board's resolution or other proof that the school district has approved the taxpayer's application for the tax credit;

(D) a copy of the tax bill sent to the taxpayer (showing the taxes imposed are net of the tax credit) [or other proof that the school district has reimbursed the tax credit to the taxpayer] ; and

(E) confirmation that, as of the date of the tax credit approval, the taxpayer has not relocated its business outside of the school district.

(3) Information required for subsequent years of tax credit. For each year subsequent to the year in which the initial request for the tax credit was approved, the request for additional state aid under the TEC, §42.2515, must include:

(A) a completed Request for Additional State Aid for Ad Valorem Tax Credit application form, including the template that comprises a component of the application showing requested and projected additional state aid for each agreement under the Texas Tax Code, Chapter 313;

(B) a copy of the tax bill sent to the taxpayer (showing the taxes imposed are net of the tax credit) [or other proof that the school district has reimbursed the tax credit to the taxpayer]; and

(C) confirmation that, as of the date of the tax credit approval, the taxpayer has not relocated its business outside of the school district.

(e) Forms. The division of the TEA responsible for state funding will make available the application form, including the template, required under subsections (d)(2) and (d)(3) of this section.

(f) Limitation of tax credit. In the fourth through the tenth years in which the agreement described in subsection (b)(2) of this section is in effect, the tax credit is limited to 50% of the total maintenance and operations and interest and sinking fund taxes imposed on the qualified property for the tax year for which the credit applies.

(g) Determination of additional state aid. For any tax year for which additional state aid authorized by the TEC, §42.2515, is approved, additional state aid will be limited to the amount of the tax credit due to the taxpayer for a qualified property that is receiving a limitation on appraised value for that year as determined in the Texas Tax Code, §313.104, as that section existed prior to the repeal of the Texas Tax Code, Chapter 313, Subchapter D, by HB 3390, 83rd Texas Legislature, Regular Session, 2013.

(h) Erroneous tax credits and recovery of state aid for erroneous tax credits. If the comptroller of public accounts or the governing body of the school district determines that an entity that received a tax credit was ineligible to have received it or received more credit than the entity should have received, the school district must provide a notification of the facts to the commissioner within 30 days of the official action. If the TEA determines that an entity that received a tax credit was ineligible to have received it or received more credit than the entity should have received, the commissioner will notify the school district within 30 days of the determination. Any overpayment of additional state aid provided to the school district based on issuance of an erroneous tax credit by the school district will be fully recovered by the TEA pursuant to the TEC, §42.258.

(i) Timeline for submission of application requests. The school district must submit its application for additional state aid for ad valorem tax credits on or before May 31 each year for which the tax credit is due.

[(1) For tax credits earned under the TEC, §42.2515, for taxes that became due and payable on January 31, 2009, or at any time before that date, the school district must submit its application for additional state aid for ad valorem tax credits on or before May 31, 2009.]

[(2) For tax credits earned under the TEC, §42.2515, for taxes that become due and payable on January 31, 2010, or at any time after that date, the school district must submit its application for additional state aid for ad valorem tax credits on or before May 31 each year for which the tax credit is due.]

(j) Payment to the school district. On approval of a school district's application for additional state aid for ad valorem tax credits by the commissioner, the amount of the credit will be applied to the entitlement due to the school district (as soon as practicable after the application is approved) [under the Foundation School Program as follows].

[(1) State aid payments for tax credits on taxes that become due and payable after January 31, 2009, will be applied to the school district entitlement as prescribed by the TEC, §42.2516(b-2)(1). Payments for this credit will be incorporated into the payments made under the schedule prescribed by the TEC, §42.259.]

[(2) State aid payments for tax credits on taxes that were due and payable on January 31, 2009, or at any time before that date will be paid on or before August 31, 2009. This paragraph expires on September 1, 2009.]

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on April 10, 2017.

TRD-201701506

Cristina De La Fuente-Valadez

Director, Rulemaking

Texas Education Agency

Earliest possible date of adoption: May 21, 2017

For further information, please call: (512) 475-1497


CHAPTER 62. COMMISSIONER'S RULES CONCERNING THE EQUALIZED WEALTH LEVEL

19 TAC §62.1071

(Editor's note: In accordance with Texas Government Code, §2002.014, which permits the omission of material which is "cumbersome, expensive, or otherwise inexpedient," the figure in 19 TAC §62.1071 is not included in the print version of the Texas Register. The figure is available in the on-line version of the April 21, 2017, issue of the Texas Register.)

The Texas Education Agency (TEA) amends §62.1071, concerning the equalized wealth level. The amendment adopts as a part of the Texas Administrative Code (TAC) the Manual for Districts Subject to Wealth Equalization 2016-2017 School Year, Revised April 2017. The manual contains the processes and procedures that the TEA uses in the administration of the provisions of the Texas Education Code (TEC), Chapter 41, and the fiscal, procedural, and administrative requirements that school districts subject to the TEC, Chapter 41, must meet.

The TEA has adopted the procedures contained in each yearly manual for districts subject to wealth equalization as part of the TAC since 2011. The earlier version of 19 TAC §62.1071, Administration of Wealth Equalization, adopted effective June 11, 1998, and subsequently amended several times, was repealed effective May 9, 2011, and replaced with the wealth equalization manual to remove outdated and obsolete provisions from rule. The intent is to annually update 19 TAC §62.1071 to refer to the most recently published manual. Manuals adopted for previous school years will remain in effect with respect to those school years.

The amendment to 19 TAC §62.1071, Manual for Districts Subject to Wealth Equalization, adopts in rule the official TEA publication Manual for Districts Subject to Wealth Equalization 2016-2017 School Year, Revised April 2017 as Figure: 19 TAC §62.1071(a).

Each school year's manual for districts subject to wealth equalization explains how districts subject to wealth equalization are identified; the fiscal, procedural, and administrative requirements those districts must meet; and the consequences for not meeting requirements. The manual also provides information on using the online Foundation School Program (FSP) System to fulfill certain requirements.

Two changes to the Manual for Districts Subject to Wealth Equalization 2016-2017 School Year, Revised April 2017 from the Manual for Districts Subject to Wealth Equalization 2016-2017 School Year are as follows.

Administrative Procedures

TEC, §41.001, requires a district's designation under this chapter to be determined based on the taxable value of property, as determined under Texas Government Code, Chapter 403, Subchapter M. The language incorrectly referring to property values used for state funding purposes under the TEC, Chapter 42, is repealed.

Taxation

The subsection titled, "What if our district offers an optional homestead exemption?" is repealed because the TEC, §42.2522(a), only applies to the TEC, Chapter 42.

The amendment places the specific procedures contained in the Manual for Districts Subject to Wealth Equalization 2016-2017 School Year, Revised April 2017 in the TAC. The TEA administers the wealth equalization provisions of the TEC, Chapter 41, according to the procedures specified in each yearly manual for districts subject to wealth equalization. Data reporting requirements are addressed primarily through the online FSP System.

The amendment has no locally maintained paperwork requirements.

FISCAL NOTE. Leo Lopez, associate commissioner for school finance/chief school finance officer, has determined that for the first five-year period the amendment is in effect, there will be no fiscal implications to state or local government, including local school districts and open-enrollment charter schools, required to comply with the amendment because statute unambiguously requires the agency to use taxable value of property as defined under Texas Government Code, Chapter 403. There is no effect on local economy for the first five years that the amendment is in effect; therefore, no local employment impact statement is required under Texas Government Code, §2001.022.

PUBLIC BENEFIT/COST NOTE. Mr. Lopez has determined that for each year of the first five years the amendment is in effect the public benefit anticipated as a result of enforcing the amendment will be to continue to inform the public of the existence of an annual publication specifying requirements for school districts subject to wealth equalization. There is no anticipated economic cost to persons who are required to comply with the amendment.

ECONOMIC IMPACT STATEMENT AND REGULATORY FLEXIBILITY ANALYSIS FOR SMALL BUSINESSES AND MICROBUSINESSES. 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.

REQUEST FOR PUBLIC COMMENT. The public comment period begins April 21, 2017, and ends May 22, 2017. Comments may be submitted to Cristina De La Fuente-Valadez, Rulemaking, Texas Education Agency, 1701 North Congress Avenue, Austin, Texas 78701. Comments may also be submitted electronically to rules@tea.texas.gov.

A public hearing on the amendment will be held from 1:30 p.m. until the conclusion of testimony or not later than 2:30 p.m. on May 1, 2017, in Room 1-111, William B. Travis Building, 1701 North Congress Avenue, Austin, Texas 78701. Questions about the hearing should be directed to the Division of State Funding at (512) 463-9238.

STATUTORY AUTHORITY. The amendment is authorized under the Texas Education Code (TEC), §41.006, which authorizes the commissioner of education to adopt rules necessary for the implementation of the TEC, Chapter 41, Equalized Wealth Level; TEC, §41.013(c), which provides that Texas Government Code, Chapter 2001, is inapplicable to decisions of the commissioner under TEC, Chapter 41; and TEC, §41.013(d), which authorizes the commissioner to request the Secretary of State to publish rules adopted under TEC, Chapter 41.

CROSS REFERENCE TO STATUTE. The amendment implements the Texas Education Code, §41.006 and §41.013(c) and (d).

§62.1071.Manual for Districts Subject to Wealth Equalization.

(a) The processes and procedures that the Texas Education Agency (TEA) uses in the administration of the provisions of the Texas Education Code (TEC), Chapter 41, and the fiscal, procedural, and administrative requirements that school districts subject to the TEC, Chapter 41, must meet are described in the official TEA publication Manual for Districts Subject to Wealth Equalization 2016-2017 School Year, Revised April 2017, provided in this subsection.

Figure: 19 TAC §62.1071(a) (.pdf)

[Figure: 19 TAC §62.1071(a)]

(b) The specific processes, procedures, and requirements used in the manual for districts subject to wealth equalization are established annually by the commissioner of education and communicated to all school districts.

(c) School district actions and inactions in previous school years and data from those school years will continue to be subject to the annual manual for districts subject to wealth equalization with respect to those years.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on April 10, 2017.

TRD-201701507

Cristina De La Fuente-Valadez

Director, Rulemaking

Texas Education Agency

Earliest possible date of adoption: May 21, 2017

For further information, please call: (512) 475-1497