H.B. No. 41 proposes significant changes to the taxation structure in Texas, particularly concerning state and local taxes, including the repeal of school district maintenance and operations ad valorem taxes. The bill introduces a state value added tax (VAT) of 6.72% on services and property supplied in the ordinary course of business, while allowing local subdivisions to impose a local VAT, provided it does not exceed 2%. The bill also establishes a school district enrichment VAT, capped at 0.5%, which can be adopted or repealed through voter approval. The revenue generated from these taxes is designated for specific educational purposes, including funding school enrichment facilities and activities.

Additionally, the bill includes provisions for the repeal of certain sections of the Tax Code and Education Code, specifically targeting existing tax structures that conflict with the new VAT system. Notably, it prohibits school districts from imposing maintenance and operations ad valorem taxes starting January 1, 2030, contingent upon the approval of a constitutional amendment by voters. The bill outlines a transition plan for school districts to adapt to the new funding model, ensuring that foundational educational needs are met while allowing for locally funded enrichment programs. The effective date for most provisions is set for January 1, 2030, with some articles taking effect earlier in 2025.

Statutes affected:
Introduced: The following provisions of the Tax Code 6.01, The following provisions of the Education Code 6.02 (The following provisions of the Education Code 6, The following provisions of the Tax Code 6)