CPA and TSCPA Member Randy Sweeten to run for Congress

Rance Sweeten, known to most TSCPA members as Randy Sweeten, has filed to run as a Democrat in Congressional District 15.  Sweeten is from McAllen and acknowledged that many Democrats might not know him well, but many TSCPA members know him because of he has been very active in TSCPA’s government affairs program for many years.

You can read more about the announcement at http://riograndeguardian.com/sweeten-enters-race-for-congressional-district-15/.

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CPA and Railroad Commissioner David Porter Withdraws from RRC Race

In announcing his withdrawal from the RRC race current RRC Chairman Porter said, “This decision was not an easy one, but I feel that all the goals I set out to achieve were accomplished during my tenure.  Now is a good time to focus on my family and my return to the private sector.”

Before being elected Porter was a practicing CPA.

According to the Quorum Report former Land Commissioner Jerry Patterson said he is considering a run for the seat and hopes to make a decision by Friday.

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TSBPA Appointments

Governor Abbott has named a new Chair for the Texas State Board of Public Accountancy, as well as appointed five new members.

Read about the appointments here.

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Early Voting Begins Today on Constitutional Amendments

Voters are asked to approve seven constitutional amendments on the Nov. 3, 2015 ballot and early voting starts today.

From Rep. Scott Sanford’s office: Here is the full list of proposed constitutional amendments for the  Nov. 3, 2015 Election with the ballot language you will see in the voting booth and a summary of the amendment.   Amendment No. 1 (S.J.R. 1)

  • Ballot Language: The constitutional amendment increasing the amount of the residence homestead exemption from ad valorem taxation for public school purposes from $15,000 to $25,000, providing for a reduction of the limitation on the total amount of ad valorem taxes that may be imposed for those purposes on the homestead of an elderly or disabled person to reflect the increased exemption amount, authorizing the legislature to prohibit a political subdivision that has adopted an optional residence homestead exemption from ad valorem taxation from reducing the amount of or repealing the exemption, and prohibiting the enactment of a law that imposes a transfer tax on a transaction that conveys fee simple title to real property.

 

Summary of Proposed Amendment. S.J.R. 1 proposes an amendment to the Texas Constitution to increase the portion of the market value of a residence homestead that is exempt from ad valorem taxation for public school purposes from $15,000 to $25,000.  In addition, the proposed amendment provides for a reduction of the limitation on the total amount of ad valorem taxes that may be imposed for those purposes on the homestead of an elderly or disabled person to reflect the increased exemption amount.  The proposed amendment also authorizes the legislature to prohibit the governing body of a political subdivision that has adopted an exemption from ad valorem taxation of a percentage of the market value of a residence homestead from reducing the amount of or repealing the exemption.  Finally, the proposed amendment prohibits the legislature from imposing a transfer tax on a transaction that conveys fee simple title to real property. The increase in the amount of the exemption to $25,000 takes effect for the tax year beginning January 1, 2015.

Amendment No. 2 (H.J.R. 75)

  • Ballot Language: The constitutional amendment authorizing the legislature to provide for an exemption from ad valorem taxation of all or part of the market value of the residence homestead of the surviving spouse of a 100 percent or totally disabled veteran who died before the law authorizing a residence homestead exemption for such a veteran took effect.

 

Summary of Proposed Amendment. The constitutional amendment proposed by H.J.R. 75 allows the legislature to extend the residence homestead exemption to the surviving spouse of a disabled veteran who would have qualified for the exemption under the 2009 law but died before the law took effect under the same conditions as a surviving spouse of a disabled veteran who died after the 2009 law took effect.  The proposed amendment also authorizes the legislature to provide that a surviving spouse who receives an exemption and who subsequently qualifies a different property as the surviving spouse’s residence homestead is entitled to an exemption from ad valorem taxation of the subsequently qualified residence homestead in an amount equal to the dollar amount of the exemption from ad valorem taxation of the former homestead in accordance with proposed Subsection (j-1) in the last year in which the surviving spouse received that exemption for that homestead if the surviving spouse has not remarried.  The proposed amendment applies only to ad valorem taxes imposed for a tax year beginning on or after January 1, 2016.

Enacted in 2015 by the Texas Legislature, H.B. 992 is the enabling legislation for the proposed amendment.  The bill provides that the surviving spouse of a disabled veteran who would have qualified for an exemption under that section if the section had been in effect on the date the disabled veteran died is entitled to receive the exemption provided by that section if the surviving spouse has not remarried since the death of the disabled veteran and the property was the residence homestead of the surviving spouse when the disabled veteran died and remains the residence homestead of the surviving spouse.  The bill applies only to ad valorem taxes imposed for a tax year beginning on or after January 1, 2016, and takes effect only if the proposed amendment is approved by the voters.

 

Amendment No. 3 (S.J.R. 52)

  • Ballot Language: The constitutional amendment repealing the requirement that state officers elected by voters statewide reside in the state capital.

 

Summary of Proposed Amendment.  The Texas Constitution requires certain state officers elected by the voters statewide, including the comptroller of public accounts, commissioner of the General Land Office, attorney general, commissioner of agriculture, and railroad commissioners, to reside at the state capital while in office.  The constitutional amendment proposed by S.J.R. 52 removes that residency requirement.  The residence of the governor is addressed by Section 13, Article IV, Texas Constitution, and is not affected by this proposed amendment.

Amendment No. 4 (H.J.R. 73)

  • Ballot Language: The constitutional amendment authorizing the legislature to permit professional sports team charitable foundations to conduct charitable raffles.

 

Summary of Proposed Amendment.  The constitutional amendment proposed by H.J.R. 73 authorizes the legislature to permit a professional sports team charitable foundation to conduct charitable raffles under the terms and conditions imposed by the law and to use raffle proceeds to pay reasonable advertising, promotional, and administrative expenses.  The provision limits the applicability of the law to an entity defined as a professional sports team charitable foundation on January 1, 2016, and limits the conduct of the raffles to games hosted at the home venue of the professional sports team associated with the foundation.

Section 47, Article III, Texas Constitution, as originally adopted in 1876, required the legislature to pass laws prohibiting all lotteries and gift enterprises in the state. Section 47 has been interpreted to prohibit the state from authorizing most forms of gambling.  However, Section 47 has been amended to provide several specific exceptions to the general prohibition.  The constitutional amendment proposed by H.J.R. 73 adds another exception to the general prohibition.

 

Amendment No. 5 (S.J.R. 17)

  • Ballot Language: The constitutional amendment authorizing counties with a population of 7,500 or less to perform private road construction and maintenance.

 

Summary of Proposed Amendment.  S.J.R. 17 proposes an amendment to the Texas Constitution to increase from 5,000 to 7,500 the maximum population threshold of a county that may construct and maintain private roads if the county imposes a reasonable charge for the work.

In 1980, voters approved a constitutional amendment adding Section 52f, Article III, Texas Constitution, authorizing counties with a population of 5,000 or less to perform private road construction and maintenance if the county imposed a reasonable charge for the work.  Money collected by the county may be used only for the construction or maintenance of public roads.  Section 52f authorizes the legislature to limit the counties’ authority. S.J.R. 17 amends Section 52f, Article III, to expand the class of counties authorized to perform private road work to those with a population of 7,500 or less.

 

Amendment No. 6 (S.J.R. 22)

  • Ballot Language: The constitutional amendment recognizing the right of the people to hunt, fish, and harvest wildlife subject to laws that promote wildlife conservation.

 

Summary of Proposed Amendment.  S.J.R. 22 creates a new right for people to hunt, fish, and harvest wildlife and establishes hunting and fishing as preferred methods of managing and controlling wildlife.  The proposed right includes the use of traditional methods of hunting, fishing, and harvesting, although those methods are not defined.  Under the proposed amendment, laws or regulations that conserve and manage wildlife and preserve the future of hunting and fishing apply to the exercise of the right to hunt, fish, or harvest wildlife.  The proposed amendment does not affect laws or regulations that relate to trespass, property rights, eminent domain, or the municipal regulation of the discharge of a weapon in a populated area in the interest of public safety.

Amendment No. 7 (S.J.R. 5)

  • Ballot Language: The constitutional amendment dedicating certain sales and use tax revenue and motor vehicle sales, use, and rental tax revenue to the state highway fund to provide funding for nontolled roads and the reduction of certain transportation-related debt.

 

Summary of Proposed Amendment.  S.J.R. 5 proposes an amendment to the Texas Constitution directing the comptroller of public accounts to annually deposit to the state highway fund, in each state fiscal year beginning with the 2018 state fiscal year, $2.5 billion of state sales and use tax revenue that exceeds the first $28 billion of those taxes collected during the fiscal year, and, in each state fiscal year beginning with the 2020 state fiscal year, 35 percent of the state motor vehicle sales, use, and rental tax revenue that exceeds the first $5 billion of those taxes collected during the state fiscal year.  The proposed amendment dedicates the tax revenue deposited to the state highway fund to constructing, maintaining, or acquiring rights-of-way for public roadways other than toll roads and to paying certain transportation-related bond debt.

 

The proposed amendment authorizes the legislature to make two types of modifications to the deposits to the state highway fund required by the amendment.  First, the proposed amendment allows the legislature, by adoption of a resolution approved by a record vote of two-thirds of the members of both houses of the legislature, to reduce the amount of state sales and use tax revenue or motor vehicle sales, use, and rental tax revenue deposited to the state highway fund in the state fiscal year in which the resolution is adopted, or in either of the two following state fiscal years, by an amount or percentage that does not result in a reduction of more than 50 percent of the amount of tax revenue from either source that would otherwise be deposited to the state highway fund.  In addition, although the proposed amendment provides that the duty of the comptroller of public accounts to deposit state sales and use tax revenue and state motor vehicle sales, use, and rental tax revenue to the state highway fund ends on August 31, 2032, and August 31, 2029, respectively, it authorizes the legislature, by adoption of a resolution approved by a record vote of a majority of the members of each house of the legislature, to extend the duty to make those deposits in 10-year increments.

  The full publication can be found online at http://www.tlc.state.tx.us/const_amends.htm

For additional information on the election you can visit the Secretary of State’s website: http://www.votetexas.gov/voting/what .      

 

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State Board of Accountancy Fee Changes

The Board approved fee changes in response to the passage of House Bill 7 (HB 7) by the 84th Texas Legislature. Effective September 1, 2015, HB 7 will eliminate the annual $200 fee for accountants and other licensed professionals in Texas. For most Texas CPAs, your license fees will be reduced by $191 in the coming year. The new renewal fee will be $66 which includes $56 to fund the operations of the Board, and $10 to the fifth-year accounting students’ scholarship trust account. The 84th Texas Legislature eliminated the $200 professional fee after September 1, 2015. However, renewal fee charges accrued prior to September 1, 2015 will continue to include the $200.

The Board will also be impacted by HB 7 and expects a revenue reduction from late payment fees, which are based on the total license fee. The Board also anticipates revenue reductions as a result of the projected number of retiring licensees, as well as CPA Exam expenditures exceeding revenue. As a result of the Board’s projected revenue, expenditures, and fund balances, modest fee increases are necessary to maintain the same level of operations for Texas licensees. Effective September 1, 2015:

  • Professional fee will decrease from $200 to $0
  • Professional fee exemption will no longer be necessary
  • Individual license fee will increase from $57 to $66
  • Firm license fee will increase from $50 to $60 per office
  • Firm organization fee for firms with 2 to 5 CPA employees and non-CPA owners will increase from $0 to $10 per individual count
  • Out-of-state firms will be subject to the organization fee based on their count of CPAs and non-CPA owners in their home state of registration
  • No changes to firm organization fees with six or more CPAs or non CPA owners

Effective October 1, 2015:

  • Retired/disabled fee will increase from $10 to $15
  • Exam application of intent fee will increase from $50 to $60

The Board is self-sustaining. All direct and indirect costs must be paid from what it collects in license renewal fees, firm registrations, exam fees, sponsor registrations, and other collections.

TEXAS STATE BOARD OF PUBLIC ACCOUNTANCY

 

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Is Texas a Business Friendly State?

Texas claims to be a business friendly state and it is in many respects. Texas has a business friendly regulatory, judicial, labor environment and no personal income tax, not to mention friendly people and lots of consumers. The one fly in the ointment is Texas’ business taxes. Texas business shares more of the state and local tax burden than all other states but two, Alaska and Wyoming, according to the Council on State Taxation’s and Ernst and Young’s State and Local Business Tax Burdens. Texas business pays 63.5% of all Texas taxes. The absence of a personal income tax is a likely explanation for the high tax share for business. Some other large industrial states show somewhat lower business tax shares: Florida 53.3%, Illinois 45.3%, New York 42.2% and California 40.4%. All but Florida have substantial personal income taxes. The high business share also reflects Texas’ relatively high property and sales taxes.

The good news is that Texas fares pretty well in total business tax burden compared to other large industrial states. Texas ranks 14th best on the list of effective tax rates for corporate headquarters and newer firms according to the Tax Foundation and KPMG in their updated publication, Location Matters. Of the thirteen states that rank ahead of Texas, only two, Ohio and Florida might be considered major industrial states with substantial populations.

Thanks to the Texas Taxpayers and Research Association for calling my attention to these two interesting studies. While some businesses might support a personal income tax for Texas to try to reduce the proportional business tax burden, business executives are probably pretty happy with no personal income tax.

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Texas Supreme Court Hears Oral Arguments in School Finance Lawsuit

For the seventh time the Texas Supreme Court heard arguments yesterday on a school lawsuit.  School districts, and others, are once again suing the state claiming the school finance system is unconstitutional.  After a district court ruled in favor of the plaintiffs, they faced off against state lawyers in the Texas Supreme Court.

I’ve read several account of the proceedings, but the most complete and succinct explanation was provided the Texas Taxpayers and Research Association in their Update from the Tax Front email message today.  Here is the article in its entirety:

Texas Supreme Court Hears Oral Arguments in School Finance Lawsuit

The Texas Supreme Court heard oral arguments today in the largest school finance lawsuit ever filed.  The lawsuit was initially filed in October 2011 and has finally reached the state’s highest court.  Over 30 attorneys participated in the lawsuit filed by 600 plaintiff school districts, two “Efficiency Intervenors,” and Charter Schools.  The Court allotted 2 ½ hours for the arguments.

The Attorney General’s Office began by stating that the case is not ripe because the data examined by the District Court did not contain changes made by the Legislature in 2013 and 2015.  The Supreme Court should, therefore, dismiss the case or remand it back to District Court for re-hearing.  In addition, the remedy sought by the Plaintiffs — an injunction prohibiting the state from sending revenue to school districts — would do further harm to school districts.  They stated that both the Nebraska Supreme Court and the Oklahoma Supreme Court had refused to hear further school finance cases because the lawsuits are continuous.  The Attorney General’s office urged the Texas Supreme Court to dismiss the case and refuse to hear further cases.

Plaintiffs argued that the system is not adequately funded, and that experts testified during the District Court trial that it required a minimum of $6,576 per weighted student for a district to be able to provide a “general diffusion of knowledge.”  Most school districts do not receive that amount of money today.  They argued that it would take a tax rate of $1.31 for the poorest 15% of school districts to raise that amount (well above the maximum allowable $1.17 rate under current law), while the wealthiest 15% of districts can raise that amount at a rate of $0.94.  This disparity in required tax rates is unconstitutionally inequitable.  The Attorney General countered that whether or not the system is adequately funded should be judged on outputs — test scores, graduation rates, college and career readiness — and not solely by the money put into the system.  They stated that Texas ranks 2nd in the nation on graduation rates and that 92% of high school students passed all tests necessary to graduate.  In addition, it has not been proven that $6,576 per weighted student is necessary to provide a “general diffusion of knowledge.”

Plaintiffs argued that the system is inequitable because the “Edgewood I court-accepted $600 funding gap” between what property poor school districts and property wealthy school districts can raise per weighted student had increased to a gap of $3,436.  The Attorney General responded that plaintiffs’ calculations were based on all school districts being at the maximum allowable tax rate which was unrealistic.  The system should be examined as it exists today.

Plaintiffs argued that the system violates the prohibition against a state property tax because approximately 25% of all school districts are at the $1.17 M&O tax rate cap, and another 55% are at $1.04 M&O rate, the rate above which voter approval is required.  They argued that these school districts do not have “meaningful discretion” over their tax rates because it is politically impossible for the districts to hold a successful tax ratification election (TRE) in order to tax higher than $1.04.  The Attorney General argued that almost all of the school districts currently taxing at the M&O rate cap of $1.17 increased their rate to that level in one election without regard to what rate was actually necessary to fund their budget.  In addition, those districts at $1.04 have not even attempted to increase their rate due to fear of holding an election.

The Efficiency Intervenors argued that the system is “qualitatively inefficient” because there is enormous waste in the public school system.  The Cost of Education Index, which was last revised over 20 years ago, distributes billions of dollars to school districts based on conditions that do not exist today.  They stated that the Legislative Budget Board is required to recommend updated funding elements to the Legislature every biennium, but has not done so in over 10 years.  The Attorney General countered that just because funding elements have not been updated in several years does not make the entire system inefficient.

The Charter Schools argued that they should receive funding for facilities from the state, and the lack of this funding provides them with $1,000 less per student than public schools receive.  The Attorney General argued that charter schools voluntarily enter into a written contract with the state which does not provide funding for facilities, and the charter schools cannot then sue the state for following the terms of the contract.

The Supreme Court justices asked many questions regarding the definitions of a “general diffusion of knowledge,” “adequacy” and “suitable” and how the violation of any of these standards can be determined.  They gave no indication of when a decision might be issued, but it typically takes 4-5 months for a decision.  If the ruling is against the state, there will most likely be an injunction with a deadline for legislative action, either necessitating a special session or action by the Legislature in the 2017 Regular Session.

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