HBA-JRA C.S.H.B. 2697 76(R)BILL ANALYSIS


Office of House Bill AnalysisC.S.H.B. 2697
By: Hunter
Ways & Means
5/7/1999
Committee Report (Substituted)



BACKGROUND AND PURPOSE 

In the mid-1990s questions arose about the taxation of business personal
property, specifically inventory, that has both tangible and intangible
value.  The 75th Texas Legislature clarified that the total sales price of
an item is subject to sales tax.  The purpose of C.S.H.B. 2697 is to
further clarify this issue as it relates to computer software.  C.S.H.B.
2697 redefines "tangible personal value" to include a computer program that
is recorded on a tape, disk, or optical medium, if the tape, disk, or
optical medium is held for sale to a purchaser under terms by which that
purchaser acquires a license to use the computer program and provides that
the market value of such a computer program is the historical cost of
acquiring the program, including the cost to acquire a license to use it,
less any accrued depreciation. 

RULEMAKING AUTHORITY

It is the opinion of the Office of House Bill Analysis that this bill does
not expressly delegate any additional rulemaking authority to a state
officer, department, agency, or institution. 

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Section 1.04(5), Tax Code, to redefine "tangible
personal property" to include a computer program as defined by Section
151.0031 ("Computer Program") that is recorded on a tape, disk, or optical
medium, if the tape, disk, or optical medium is held for sale to a
purchaser under terms by which that purchaser acquires a license to use the
computer program. 

SECTION 2.  Amends Subchapter A, Chapter 23, Tax Code, by adding Section
23.03, as follows: 

Sec. 23.03.  MARKET VALUE OF COMPUTER SOFTWARE.  Provides that the market
value of a tape, disk, or optical medium on which a computer program is
recorded is the historical cost of acquiring the tape, disk, or optical
medium, including the cost to acquire a license to use the computer
program, less any accrued depreciation.  Defines "computer program." 

SECTION 3.  Effective date:  January 1, 2000.
Makes application of this Act prospective.

SECTION 4.  Emergency clause.

COMPARISON OF ORIGINAL TO SUBSTITUTE

The substitute modifies the original in SECTION 1 by amending Section
1.04(5), Tax Code, rather than Section 1.04(6), Tax Code, to redefine
"tangible personal property," rather than "intangible personal property." 

The substitute modifies the original in SECTION 2 by replacing proposed
Section 23.03 and adding a new Section 23.03.  Proposed Section 23.03 of
the original would have required the chief appraiser, in determining the
market value of real or personal property, to include any intangible value
associated with and dependent for its existence on that property, including
characteristics such as location, availability of views, brand name, zoning
status, or the existence of a permit or other  authorization governing the
use of the property.  The substitute provides that the market value of a
tape, disk, or optical medium on which a computer program is recorded is
the historical cost of acquiring the tape, disk, or optical medium,
including the cost to acquire a license to use the computer program, less
any accrued depreciation and defines "computer program."