H.B. No. 399 proposes an amendment to the Texas Tax Code by adding Section 11.144, which establishes an exemption from ad valorem taxation for income-producing tangible personal property owned by small businesses for a period of three years following their incorporation. This exemption applies specifically to small businesses as defined by Section 481.401(10) of the Government Code and to individuals who file a rendition statement under Section 22.01 of the Tax Code. The bill outlines that eligible property must be held or used for the production of income.

The bill stipulates that the exemption will only apply to ad valorem taxes imposed for tax years beginning on or after the effective date of the Act, which is set for January 1, 2026. However, this implementation is contingent upon the approval of a constitutional amendment proposed by the 89th Legislature in 2025, which would authorize such exemptions. If the amendment is not approved by voters, the provisions of this Act will not take effect.

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