The bill, H.B. No. 99, proposes significant changes to the taxation system in Texas, specifically targeting school district maintenance and operations (M&O) ad valorem taxes. It aims to repeal the authority of school districts to levy M&O taxes starting in the 2030 tax year, with all related provisions being repealed effective January 1, 2030. In place of these taxes, the bill introduces a state value-added tax (VAT) on goods and services, set initially at a rate of 6.72%. The revenue generated from this VAT will be allocated exclusively to the Foundation School Fund to support public education operations that were previously funded by M&O property taxes. The implementation of this VAT is contingent upon the approval of a constitutional amendment by voters that prohibits school districts from imposing M&O ad valorem taxes.

Additionally, the bill mandates the comptroller of public accounts to conduct a comprehensive study on the feasibility of replacing all local property taxes with local value-added taxes. This study will assess various factors, including revenue needs, rate structures, and economic impacts, and is expected to be completed by December 1, 2026. The legislature intends to use the findings from this study to draft legislation aimed at eliminating remaining local ad valorem taxes and replacing them with local VATs, effective January 1, 2030. The bill is set to take effect 91 days after the end of the legislative session, with specific provisions taking effect on the aforementioned dates.

Statutes affected:
Introduced: Subtitle E, Title , Tax Code 1.02, The following provisions of the Tax Code 2.01, The following provisions of the Education Code 2.02 (Subtitle E, Title , Tax Code 1, The following provisions of the Education Code 2, The following provisions of the Tax Code 2)