85R7172 CJC/JXC-D     By: King of Parker H.B. No. 1228       A BILL TO BE ENTITLED   AN ACT   relating to the phaseout and repeal of the miscellaneous gross   receipts tax on utility companies; decreasing the rates of the tax.          BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:   ARTICLE 1. CHANGES EFFECTIVE DURING PHASEOUT OF TAX          SECTION 1.01.  Effective September 1, 2020, Sections   447.013(d) and (e), Government Code, are amended to read as   follows:          (d)  The account consists of:                (1)  [a sub-account in the account that consists of the   proceeds of bonds issued under Subsection (j);                [(2)]  revenues allocated to the account under former   Section 182.122(b) [182.122], Tax Code, before September 1, 2020;                (2) [(3)]  any amount appropriated by the legislature   for the account;                (3) [(4)]  gifts, grants, and other donations received   for the account; and                (4) [(5)]  interest earned on the investment of money   in the account.          (e)  Money in the account may be appropriated only to the   State Energy Conservation Office to award grants or to make or   guarantee loans under this section. The total amount of grants that   may be awarded under this section in any state fiscal biennium from   revenues described by Subsection (d)(1) [(d)(2)] may not exceed $20   million. The total amount of loans that may be made or guaranteed   under this section in any state fiscal biennium from revenues   described by Subsection (d)(1) [(d)(2)] may not exceed $10 million.          SECTION 1.02.  (a) Section 182.022(b), Tax Code, is amended   to read as follows:          (b)  The tax rates are:                (1)  .465 [.581] percent of the gross receipts from   business done in an incorporated city or town having a population of   more than 1,000 but less than 2,500[, according to the last federal   census next preceding the filing of the report];                (2)  .856 [1.07] percent of the gross receipts from   business done in an incorporated city or town having a population of   2,500 or more but less than 10,000[, according to the last federal   census next preceding the filing of the report]; and                (3)  1.598 [1.997] percent of the gross receipts from   business done in an incorporated city or town having a population of   10,000 or more[, according to the last federal census next   preceding the filing of the report].          (b)  This section applies only to a gross receipts tax report   due on or after January 31, 2018.          SECTION 1.03.  (a) Effective October 1, 2018, Section   182.022(b), Tax Code, is amended to read as follows:          (b)  The tax rates are:                (1)  .349 [.581] percent of the gross receipts from   business done in an incorporated city or town having a population of   more than 1,000 but less than 2,500[, according to the last federal   census next preceding the filing of the report];                (2)  .642 [1.07] percent of the gross receipts from   business done in an incorporated city or town having a population of   2,500 or more but less than 10,000[, according to the last federal   census next preceding the filing of the report]; and                (3)  1.198 [1.997] percent of the gross receipts from   business done in an incorporated city or town having a population of   10,000 or more[, according to the last federal census next   preceding the filing of the report].          (b)  This section applies only to a gross receipts tax report   due on or after January 31, 2019.          SECTION 1.04.  (a) Effective October 1, 2019, Section   182.022(b), Tax Code, is amended to read as follows:          (b)  The tax rates are:                (1)  .232 [.581] percent of the gross receipts from   business done in an incorporated city or town having a population of   more than 1,000 but less than 2,500[, according to the last federal   census next preceding the filing of the report];                (2)  .428 [1.07] percent of the gross receipts from   business done in an incorporated city or town having a population of   2,500 or more but less than 10,000[, according to the last federal   census next preceding the filing of the report]; and                (3)  .799 [1.997] percent of the gross receipts from   business done in an incorporated city or town having a population of   10,000 or more[, according to the last federal census next   preceding the filing of the report].          (b)  This section applies only to a gross receipts tax report   due on or after January 31, 2020.          SECTION 1.05.  (a) Effective October 1, 2020, Section   182.022(b), Tax Code, is amended to read as follows:          (b)  The tax rates are:                (1)  .116 [.581] percent of the gross receipts from   business done in an incorporated city or town having a population of   more than 1,000 but less than 2,500[, according to the last federal   census next preceding the filing of the report];                (2)  .214 [1.07] percent of the gross receipts from   business done in an incorporated city or town having a population of   2,500 or more but less than 10,000[, according to the last federal   census next preceding the filing of the report]; and                (3)  .399 [1.997] percent of the gross receipts from   business done in an incorporated city or town having a population of   10,000 or more[, according to the last federal census next   preceding the filing of the report].          (b)  This section applies only to a gross receipts tax report   due on or after January 31, 2021.          SECTION 1.06.  Section 182.122, Tax Code, as effective until   September 1, 2020, is amended by adding Subsection (c) to read as   follows:          (c)  In each state fiscal biennium at the time the   comptroller makes the allocation required under this section, the   comptroller shall determine the difference between the amount of   revenue that would be allocated to the foundation school fund under   Subsection (a)(1) during that state fiscal biennium if the tax   imposed under Section 182.022 were imposed at the rates in effect on   September 30, 2017, and the amount of revenue actually allocated to   the foundation school fund under Subsection (a)(1) during that   biennium. The comptroller shall transfer from the general revenue   fund an amount equal to that difference and credit that amount to   the foundation school fund. The transfer required by this   subsection is in addition to the allocation of revenue to the   foundation school fund under Subsection (a).          SECTION 1.07.  Section 182.122, Tax Code, as effective   September 1, 2020, is amended to read as follows:          Sec. 182.122.  ALLOCATION OF TAX. (a) Revenues collected   under this chapter are allocated:                (1)  one-fourth to the foundation school fund; and                (2)  three-fourths to the general revenue fund.          (b)  In each state fiscal biennium at the time the   comptroller makes the allocation required under this section, the   comptroller shall determine the difference between the amount of   revenue that would be allocated to the foundation school fund under   Subsection (a)(1) during that state fiscal biennium if the tax   imposed under Section 182.022 were imposed at the rates in effect on   September 30, 2017, and the amount of revenue actually allocated to   the foundation school fund under Subsection (a)(1) during that   biennium. The comptroller shall transfer from the general revenue   fund an amount equal to that difference and credit that amount to   the foundation school fund. The transfer required by this   subsection is in addition to the allocation of revenue to the   foundation school fund under Subsection (a).          SECTION 1.08.  Subchapter E, Chapter 36, Utilities Code, is   amended by adding Section 36.2025 to read as follows:          Sec. 36.2025.  ADJUSTMENT FOR CHANGES IN GROSS RECEIPTS TAX   LIABILITY. (a) The commission shall provide in a rate case under   Subchapter C or D for the prospective adjustment of an electric   utility's billing to reflect a decrease in the utility's tax   liability to this state if the decrease results from a reduction in   a rate of the miscellaneous gross receipts tax imposed under   Chapter 182, Tax Code, before October 1, 2021, or from the repeal of   that chapter.          (b)  The commission shall make an adjustment described by   Subsection (a) in the first rate case that begins after a decrease   in tax liability occurs. The adjustment remains effective only   until a subsequent adjustment under this section.          SECTION 1.09.  Subchapter G, Chapter 104, Utilities Code, is   amended by adding Section 104.302 to read as follows:          Sec. 104.302.  ADJUSTMENT FOR CHANGES IN GROSS RECEIPTS TAX   LIABILITY. (a) The regulatory authority shall provide for the   adjustment of a gas utility's billing to reflect a decrease in the   utility's tax liability to this state if the decrease results from a   reduction in a rate of the miscellaneous gross receipts tax imposed   under Chapter 182, Tax Code, before October 1, 2021, or from the   repeal of that chapter.          (b)  Each adjustment described by Subsection (a):                 (1)  shall be made effective at the same time as the   decrease of tax liability or as soon after that decrease occurs as   is reasonably practicable; and                (2)  remains effective only until a subsequent   adjustment under this section.          (c)  This section does not apply to a gas utility if the   regulatory authority enters an order for the utility under   Subchapter C or D that accounts for the reduction or repeal of tax   liability described by Subsection (a).          (d)  An adjustment under this section is not a rate case   under Subchapter C or D.          SECTION 1.10.  Subchapter F, Chapter 13, Water Code, is   amended by adding Section 13.1885 to read as follows:          Sec. 13.1885.  ADJUSTMENT FOR CHANGES IN GROSS RECEIPTS TAX   LIABILITY. (a) The regulatory authority shall provide for the   adjustment of a utility's billing to reflect a decrease in the   utility's tax liability to this state if the decrease results from a   reduction in a rate of the miscellaneous gross receipts tax imposed   under Chapter 182, Tax Code, before October 1, 2021, or from the   repeal of that chapter.          (b)  Each adjustment described by Subsection (a):                (1)  shall be made effective at the same time as the   decrease of tax liability or as soon after that decrease occurs as   is reasonably practicable; and                (2)  remains effective only until a subsequent   adjustment under this section.          (c)  This section does not apply to a utility if the   regulatory authority determines the utility's rates by an order   issued under this subchapter for the utility that accounts for the   reduction or repeal of tax liability described by Subsection (a).          (d)  An adjustment under this section is an uncontested   matter not subject to a contested case hearing. An adjustment under   this section is not a rate case.   ARTICLE 2. REPEAL OF TAX ON OCTOBER 1, 2021, AND CHANGES EFFECTIVE   ON REPEAL OF TAX          SECTION 2.01.  (a) The following provisions of the Tax Code   are repealed:                (1)  the heading to Chapter 182;                (2)  the headings to Subchapters B and C, Chapter 182;                (3)  Sections 182.021, 182.022, 182.023, and 182.027;                (4)  Subchapters E, F, and G, Chapter 182; and                (5)  Section 191.089.          (b)  The repeal by this section of the provisions of Chapter   182, Tax Code, listed in Subsection (a) of this section does not   affect the taxes imposed under that chapter before the effective   date of this article. The provisions of Chapter 182 in effect   immediately before the effective date of this article that relate   to the collection and enforcement of the taxes accruing before the   effective date of this article and to the allocation of revenue from   those taxes are continued in effect for purposes of collecting and   enforcing those taxes, including enforcing the requirements to file   tax reports and make tax payments on or before October 31, 2021, and   allocating revenue from those taxes.          (c)  The repeal by this section of the provisions of Chapter   182, Tax Code, listed in Subsection (a) and Section 191.089, Tax   Code, does not affect the imposition of a penalty under Chapter 182,   Tax Code, for conduct occurring before the effective date of this   article. For purposes of this subsection, conduct occurs before   the effective date of this article if any element of the conduct   subject to the imposition of the penalty occurs before that date.   Conduct occurring before the effective date of this article is   governed by the law in effect when the conduct occurred, and the   former law is continued in effect for that purpose.          SECTION 2.02.  Section 91.904, Natural Resources Code, is   amended to read as follows:          Sec. 91.904.  CONSTRUCTION OF SUBCHAPTER. This subchapter   may not be construed to:                (1)  limit the authority of a saltwater pipeline   facility to use a public right-of-way under any other law;                (2)  affect the authority of a municipality to:                      (A)  regulate the use of a public right-of-way by   a saltwater pipeline operator under any other law; or                      (B)  require payment of any applicable charge   under Section 253.003, Utilities [182.025, Tax] Code; or                (3)  require a county or municipality to:                      (A)  grant a right to a saltwater pipeline   operator that applies to a public road or right-of-way and that is   broader than the county's or municipality's legal interest in the   public road or right-of-way; or                      (B)  grant more than a surface right to a   saltwater pipeline operator in a right-of-way acquired by   prescription.          SECTION 2.03.  Section 37.101(d), Utilities Code, is amended   to read as follows:          (d)  This section does not:                (1)  limit the power of a city, town, or village to   incorporate or of a municipality to extend its boundaries by   annexation; or                (2)  prohibit a municipality from levying a tax or   other special charge for the use of the streets as authorized by   Section 253.003 [182.025, Tax Code].          SECTION 2.04.  Section 41.005, Utilities Code, is amended to   read as follows:          Sec. 41.005.  LIMITATION ON MUNICIPAL AUTHORITY.   Notwithstanding any other provision of this title, a municipality   may not directly or indirectly regulate the rates, operations, and   services of an electric cooperative, except, with respect to   operations, to the extent necessary to protect the public health,   safety, or welfare. This section does not prohibit a municipality   from making a lawful charge for the use of public rights-of-way   within the municipality as provided by Sections [Section 182.025,   Tax Code, and Section] 33.008 and 253.003. An electric cooperative   shall be an electric utility for purposes of Sections [Section   182.025, Tax Code, and Section] 33.008 and 253.003.          SECTION 2.05.  Section 121.2025(a), Utilities Code, is   amended to read as follows:          (a)  Except as otherwise provided by this section or Section   253.003 [182.025, Tax Code], a municipality may not assess a charge   for the placement, construction, maintenance, repair, replacement,   operation, use, relocation, or removal of a gas pipeline facility   on, along, under, or across a public road, highway, street, alley,   stream, canal, or other public way.          SECTION 2.06.  Section 121.211(g), Utilities Code, is   amended to read as follows:          (g)  Each operator of a natural gas distribution system and   each natural gas master meter operator shall recover as a surcharge   to its existing rates the amounts paid to the commission under this   section. Amounts collected under this subsection by an   investor-owned natural gas distribution system or a cooperatively   owned natural gas distribution system shall not be included in the   revenue or gross receipts of the company for the purpose of   calculating municipal franchise fees or any tax imposed under   [Subchapter B, Chapter 182, Tax Code, or under] Chapter 122 or   Section 253.003. Those amounts are not subject to a sales and use   tax imposed by Chapter 151, Tax Code, or Subtitle C, Title 3, Tax   Code.          SECTION 2.07.  Section 181.005(b), Utilities Code, is   amended to read as follows:          (b)  The right granted by Subsection (a) relating to the use   of a municipal street or alley is subject to the payment of charges   in accordance with Sections [Section] 121.2025 and 253.003 [of this   code and Sections 182.025 and 182.026, Tax Code].          SECTION 2.08.  Section 181.047(d), Utilities Code, is   amended to read as follows:          (d)  This section does not prohibit a municipality from   imposing a tax or special charge for the use of a street as   authorized by [Subchapter B,] Chapter 253 [182, Tax Code].          SECTION 2.09.  (a) Title 5, Utilities Code, is amended by   adding Chapter 253 to read as follows:   CHAPTER 253. TAXES AND CHARGES IMPOSED ON OR PROHIBITED FROM BEING   IMPOSED ON CERTAIN UTILITIES LOCATED IN INCORPORATED AREAS          Sec. 253.001.  DEFINITIONS. (a) In this chapter:                (1)  "Business" means the provision of gas,   electricity, or water.                (2)  "Distribution service" has the meaning assigned by   Section 33.008.                (3)  "Electric utility" has the meaning assigned by   Section 31.002.                (4)  "Public utility" means:                      (A)  a person who owns or operates a gas or water   works or water plant used for local sale and distribution located in   an incorporated city or town in this state; or                      (B)  an electric utility or transmission and   distribution utility providing distribution service in an   incorporated city or town in this state.                (5)  "Transmission and distribution utility" has the   meaning assigned by Section 31.002.                (6)  "Utility company" means, except as provided by   Subsection (b), a person:                      (A)  who owns or operates a gas or water works or   water plant used for local sale and distribution located in an   incorporated city or town in this state; or                      (B)  who owns or operates an electric light or   electric power works or light plant used for local sale and   distribution located in an incorporated city or town in this state,   or who is a retail electric provider, as that term is defined in   Section 31.002, including a retail electric provider owned,   operated, or controlled by an electric cooperative, that makes   local sales in an incorporated city or town in this state.          (b)  For purposes of this chapter, "utility company" does not   include a person who owns an electric light or electric power or gas   plant used for distribution but who does not make retail sales to   the ultimate consumer in an incorporated city or town in this state.          (b)  Sections 182.024, 182.025, and 182.026, Tax Code, are   transferred to Chapter 253, Utilities Code, as added by this   section, redesignated as Sections 253.002, 253.003, and 253.004,   Utilities Code, respectively, and amended to read as follows:          Sec. 253.002 [182.024].  TAX OR CHARGE BY CERTAIN POLITICAL   SUBDIVISIONS. No city or other political subdivision of this state   may impose an occupation tax or charge of any sort on a utility   company located in an incorporated city or town with a population of   more than 1,000 [taxed under this subchapter].          Sec. 253.003 [182.025].  CHARGES BY A CITY. (a) An   incorporated city or town may make a reasonable lawful charge for   the use of a city street, alley, or public way by a public utility in   the course of its business.          (b)  The total charges, however designated or measured, may   not exceed two percent of the gross receipts of the public utility   for the sale of gas or water within the city.          (c)  The total charges, however designated or measured,   relating to distribution service of an electric utility or   transmission and distribution utility within the city may not   exceed the amount or amounts prescribed by Section 33.008[,   Utilities Code]. The charges paid by an electric utility or   transmission and distribution utility under this subsection may be   only for distribution service.          (d)  If a public utility located in an incorporated city or   town with a population of more than 1,000 [taxed under this   subchapter] pays a special tax, rental, contribution, or charge   under a contract or franchise executed before May 1, 1941, the city   shall credit the payment against the amount owed by the public   utility on any charge allowable under Subsection (a) [of this   section].          [(e)  In this section:                [(1)     "Distribution service" has the meaning assigned   by Section 33.008, Utilities Code.                [(2)     "Electric utility" has the meaning assigned by   Section 31.002, Utilities Code.                [(3)  "Public utility" means:                      [(A)     a person who owns or operates a gas or water   works or water plant used for local sale and distribution located   within an incorporated city or town in this state; or                      [(B)     an electric utility or transmission and   distribution utility providing distribution service within an   incorporated city or town in this state.                [(4)     "Transmission and distribution utility" has the   meaning assigned by Section 31.002, Utilities Code.]          Sec. 253.004 [182.026].  APPLICABILITY AND EFFECT OF   CHAPTER [SUBCHAPTER NOT APPLICABLE]. (a) This chapter    [subchapter] does not apply to a utility company owned and operated   by a city, town, county, water improvement district, or   conservation district.          (b)  This chapter [subchapter] does not:                (1)  affect collection of ad valorem taxes; or                (2)  impair or alter a provision of a contract,   agreement, or franchise made between a city and a public utility   company relating to a payment made to the city.          SECTION 2.10.  Section 13.247(c), Water Code, is amended to   read as follows:          (c)  This section may not be construed as limiting the power   of municipalities to incorporate or extend their boundaries by   annexation, or as prohibiting any municipality from levying taxes   and other special charges for the use of the streets as are   authorized by Section 253.003, Utilities [182.025, Tax] Code.   ARTICLE 3. EFFECTIVE DATE          SECTION 3.01.  (a) Except as provided by Subsection (b) of   this section, this Act takes effect October 1, 2017.          (b)  Article 2 of this Act takes effect October 1, 2021.