TITLE 19. EDUCATION

PART 2. TEXAS EDUCATION AGENCY

CHAPTER 105. FOUNDATION SCHOOL PROGRAM

SUBCHAPTER A. DEFINITIONS

19 TAC §105.1

The State Board of Education (SBOE) proposes an amendment to §105.1, concerning the Foundation School Program. The proposed amendment would ensure that the definition of tax collections for purposes of the Texas Education Code (TEC), §42.004, and as used in issuing additional state aid for ad valorem tax credits under the TEC, §42.2515, complies with Texas Tax Code, Chapter 313.

The rule in 19 TAC Chapter 105, Subchapter A, establishes definitions for tax collections used to calculate state aid under the TEC, Chapters 42 and 46, and to implement the wealth-equalizing provisions of the TEC, Chapter 41.

Specifically, 19 TAC §105.1 establishes maintenance and operations (M&O) tax collections as those taxes collected during the fiscal year that are associated with the levy of local M&O tax rates, including current and delinquent taxes and any delinquent taxes related to former county education districts, but not including penalties and interest that accrue on delinquent M&O tax levies.

The proposed amendment to §105.1 would update the rule to comply with Texas Tax Code, Chapter 313, and exclude Chapter 313 tax credits from tax collections used to calculate state aid under TEC, Chapter 42, and recapture under TEC, Chapter 41. Additional state aid for ad valorem tax credits issued under the TEC, §42.2515, would be issued in accordance with Texas Tax Code, Chapter 313.

The SBOE approved the amendment for first reading and filing authorization at its June 23, 2017 meeting.

The proposed amendment would require school districts to report tax collections in accordance with the amended rule, but there would be no changes to the mechanisms for reporting tax collections.

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 Chapter 313 agreements are net of the Chapter 313 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 proposed amendment is in effect there will be no additional costs to state and local government as a result of enforcing or administering the proposed amendment because the Texas Tax Code, Chapter 313, unambiguously entitles persons granted value limitations to a tax credit rather than reimbursement by the district for taxes paid.

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 proposed amendment is in effect, the public benefit anticipated as a result of enforcing the amendment will be aligning the accounting of tax collections with current law, delivering the correct state aid under TEC, Chapter 42, and calculating the correct recapture amount under TEC, Chapter 41. 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. 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 proposed amendment 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.

STATUTORY AUTHORITY. The amendment is proposed under the Texas Education Code (TEC), §42.004, which requires the commissioner of education, in accordance with the rules of the State Board of Education, to take such action and require such reports consistent with the TEC, Chapter 42, as may be necessary to implement and administer the Foundation School Program.

CROSS REFERENCE TO STATUTE. The amendment implements the Texas Education Code, §42.004.

§105.1.Rules for the Definition of Tax Levy and Tax Collection.

(a) General provisions. For the purpose of determining state aid under the Texas Education Code, Chapter 42 and Chapter 46, and in implementing the wealth-equalizing provisions of the Texas Education Code, Chapter 41, calculations that include tax collections as a data element shall reference subsection (b) of this section.

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

(1) Total levy. The sum of the maintenance and operation and debt service levies generated by applying a district's adopted tax rates to its locally assessed valuation of property for the current tax year.

(2) Tax collection.

(A) For districts with a fiscal year that begins on July 1, total taxes collected between July 1 and June 30 for the current and all prior years' levies.

(B) For districts with a fiscal year that begins on September 1, total taxes collected between September 1 and August 31 for the current and all prior years' levies.

(C) For a district that has been awarded a property value adjustment for a major taxpayer protest pursuant to Texas Education Code, §42.2531, the district may petition the commissioner to attribute taxes that had been withheld due to the protest of valuation to the year in which the taxes were originally levied.

(3) Types of tax collections.

(A) Maintenance and operations taxes are those taxes collected during the fiscal year that are associated with the levy of local maintenance and operations tax rates, including current and delinquent taxes and any delinquent taxes related to former county education districts, but not including penalties and interest that accrue on delinquent maintenance and operations tax levies or the tax credits authorized by the Texas Tax Code, Chapter 313.

(B) Interest and sinking fund taxes are those associated with the levy of local interest and sinking fund taxes, not including penalties and interest that accrue on delinquent interest and sinking funds tax levies.

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 July 17, 2017.

TRD-201702701

Cristina De La Fuente-Valadez

Director, Rulemaking

Texas Education Agency

Earliest possible date of adoption: August 27, 2017

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