June 2017 Committee on School Finance Permanent School Fund Item 1

Proposed Amendment to 19 TAC Chapter 105, Foundation School Program, Subchapter A, Definitions, §105.1, Rules for the Definition of Tax Levy and Tax Collection
(First Reading and Filing Authorization)

June 23, 2017

COMMITTEE ON SCHOOL FINANCE/PERMANENT SCHOOL FUND: ACTION
STATE BOARD OF EDUCATION: CONSENT


SUMMARY: This item presents for first reading and filing authorization a proposed amendment to 19 TAC Chapter 105, Foundation School Program, Subchapter A, Definitions, §105.1, Rules for the Definition of Tax Levy and Tax Collection. 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.

STATUTORY AUTHORITY: TEC, §42.004.

TEC, §42.004, requires the commissioner of education, in accordance with the rules of the State Board of Education (SBOE), 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.

EFFECTIVE DATE: The proposed effective date of the proposed amendment to 19 TAC §105.1 would be 20 days after filing as adopted with the Texas Register. Under the TEC, §7.102(f), the SBOE must approve the rule action at second reading and final adoption by a vote of two-thirds of its members to specify an effective date earlier than the beginning of the 2018-2019 school year. The earlier effective date would implement the latest policy in a timely manner.

PREVIOUS BOARD ACTION: The SBOE adopted 19 TAC §105.1 effective September 1, 1996, and amended it effective June 6, 2004. The proposed amendment was presented to the committee for discussion at the April 2017 SBOE meeting.

BACKGROUND INFORMATION AND SIGNIFICANT ISSUES: 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.

FISCAL IMPACT: The Texas Education Agency has determined that there are no additional costs to persons or entities, including local school districts and open-enrollment charter schools, required to comply with 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. In addition, 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. There is no effect on local economy for the first five years the proposed amendment is in effect; therefore, no local employment impact statement is required under Texas Government Code, §2001.022.

PUBLIC AND STUDENT BENEFIT: The proposed amendment would align 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.

PROCEDURAL AND REPORTING IMPLICATIONS: 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.

LOCALLY MAINTAINED PAPERWORK REQUIREMENTS: 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.

PUBLIC COMMENTS: The official public comment period will begin when the proposal, approved for first reading and filing authorization, is published in the Texas Register.

ALTERNATIVES: None.

OTHER COMMENTS AND RELATED ISSUES: 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.

MOTION TO BE CONSIDERED: The State Board of Education:

Approve for first reading and filing authorization the proposed amendment to 19 TAC Chapter 105, Foundation School Program, Subchapter A, Definitions, §105.1, Rules for the Definition of Tax Levy and Tax Collection.

Staff Members Responsible:
Leo Lopez, Associate Commissioner
School Finance / Chief School Finance Officer

Al McKenzie, Director
State Funding

Attachments:
I. Statutory Citation  (PDF, 13 KB)
II. Text of Proposed Amendment to 19 TAC Chapter 105, Foundation School Program, Subchapter A, Definitions, §105.1, Rules for the Definition of Tax Levy and Tax Collection (PDF, 18 KB)