BOMA Margin Tax Bill Excludes Pass Throughs From Gross Revenue

Yesterday, the House Ways & Means Committee met to take up, among other bills, HB 2775 by Rep. Dan Branch (R-Dallas).  This bill would exclude from gross revenue, for purposes of the Margin Tax, amounts commercial landlords collect from tenants for pass-through expenses, such as taxes and contracted services.  Importantly, several members of the Committee, including Chairman Hilderbran (R-Fredericksburg), are involved in the commercial real estate industry, giving a general understanding of the issue.

Texas BOMA members attended the hearing and provided testimony. The hearing which lasted from early afternoon until the evening.  Our members shared with Rep. Branch information on  fairness and fiscal impact of the current tax structure.  
 

At this time, the bill is pending in the Committee, meaning no action was taken on it yesterday.  Rep. Branch is working on a committee substitute to lower the fiscal note on the legislation, which is currently around $36 million for the biennium.  Chairman Hilderbran said his intention was to compile a matrix of tax issues, showing the various types of Margin Tax fixes that are intended for fairness, such as this bill and others that would make entities engaged in similar businesses taxed similarly, as well as their cost to the state.

Because of the bill’s fiscal note, we remain concerned about its likelihood of passage.  We will continue to work with Rep. Branch and the Committee on the legislation, and will keep you informed as things progress.