S.B. No. 32 proposes significant changes to the ad valorem taxation of tangible personal property used for income production by increasing the exemption amount from less than $2,500 to $25,000. The bill amends Section 11.145 of the Tax Code to define key terms such as "inventory," "related business entity," and "unified business enterprise," and clarifies that the exemption applies to each separate location where the property is held or used. It also allows for the aggregation of property owned by related business entities to determine taxable value and ensures that individuals who lease tangible personal property are entitled to the same exemption. The bill is contingent upon the approval of a constitutional amendment and is set to take effect on January 1, 2026.

In addition to the exemption, the bill introduces a franchise tax credit for inventory ad valorem tax liability, defining "inventory" in a new subchapter of the Tax Code. This credit is available to taxable entities and is limited to the lesser of the total franchise tax due or 20% of the ad valorem taxes imposed on their inventory, with a cap of $500 million on total credits awarded in a year. The application process for the credit requires entities to submit documentation electronically, and the comptroller is authorized to verify eligibility. The provisions of this subchapter will only apply to reports originally due on or after January 1, 2026.

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 11, Tax Code 31, Chapter , Tax Code 37, Tax Code 22)
Senate Committee Report: Tax Code 11.145, Tax Code 22.01, Tax Code 22.24, Chapter , Tax Code 37.10, Tax Code 31.01 (Tax Code 11, Tax Code 31, Chapter , Tax Code 37, Tax Code 22)
Engrossed: Tax Code 11.145, Tax Code 22.01, Tax Code 22.24, Chapter , Tax Code 37.10, Tax Code 31.01 (Tax Code 11, Tax Code 31, Chapter , Tax Code 37, Tax Code 22)