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."