S.B. No. 32 proposes significant changes to the Tax Code regarding ad valorem taxation for tangible personal property used for income production. The bill raises the exemption threshold from $2,500 to $25,000, allowing for a more substantial portion of property value to be exempt from taxation. It introduces definitions for "inventory," "related business entity," and "unified business enterprise," and clarifies that the exemption applies to each separate location within a taxing unit. Additionally, the bill allows for the aggregation of property owned by related business entities to determine taxable value, ensuring that businesses can benefit from the exemption more effectively.

Moreover, the bill establishes a franchise tax credit for taxable entities based on the ad valorem taxes paid on their inventory, capped at $700 million annually. The credit is defined as the lesser of the total franchise tax due after applying other credits or 20% of the previous year's aggregate ad valorem taxes on inventory. The comptroller is tasked with creating rules for credit allocation and may require additional information from entities to establish eligibility. The new regulations will take effect on January 1, 2026, contingent upon the approval of a constitutional amendment allowing for the exemption of a portion of the market value of such property from ad valorem taxation.

Statutes affected:
Introduced: Tax Code 11.145, Tax Code 22.01, Tax Code 22.24, Chapter , Tax Code 37.10, Tax Code 31.01 (Tax Code 22, Chapter , Tax Code 37, Tax Code 31, Tax Code 11)